Foreign Secretary William Hague has attacked Israel's decision to authorise the construction of 1,500 new housing units in the West Bank and East Jerusalem.
"I deplore the decisions taken by the Israeli authorities on June 4 to expand a number of illegal settlements, many of which are deep within the West Bank, and in East Jerusalem. Such decisions can only make achieving peace more difficult," said Mr Hague.
"The UK's position on settlements is longstanding: they are illegal under international law, undermine trust and threaten the viability of the two-state solution."
The Foreign Secretary continued: "A negotiated two state solution is the only solution to the Israeli-Palestinian conflict. I urge the leaders of both sides to demonstrate the courage, vision and urgency needed to achieve this."
On Thursday, Israeli Housing Minister Uri Ariel said he approved the building of 1,500 new homes in Jewish settlements in response to the formation of a new Palestinian unity government with the Gaza-based militant group, Hamas.
Hamas is defined as a terrorist organisation by both the UK Home Office and the US State Department.
The Palestinian Authority has threatened "unprecedented" retaliation against the expansion of settlements with Chief Negotiator Saeb Erekat calling Israel's move a "major escalation".