Israel on Wednesday rejected international outcry over its plans to build 1,100 new homes in Gilo in annexed east Jerusalem, insisting the neighbourhood was "not a settlement." "Gilo is not a settlement, nor a settlement outpost. It is a neighbourhood which constitutes an integral part of the centre of Jerusalem," a senior Israeli official told AFP. The move, which was signed off by Israel's interior ministry on Tuesday, drew a sharply worded response from the Palestinians, and a chorus of condemnation from Europe, the United States and China. Gilo lies in mostly Arab east Jerusalem, which Israel captured along with the West Bank from Jordan during the 1967 Six Day War and later annexed in a move not recognised by the international community. Israel considers both halves of the Holy City its "eternal, indivisible" capital, and does not view construction in the east to be settlement activity. "In all the peace plans put on the table over the last 20 years, Gilo will remain part of Jewish Jerusalem," he said, insisting such a move "does not contradict the commitments undertaken by Israel regarding peace or a two-state solution for two peoples." Building in Gilo "is a continuation of a policy followed by all Israeli governments since 1967: to build in Jewish neighbourhoods in the city," he said. The Palestinians, who fiercely oppose any Israeli construction in the city's eastern sector, which they want as capital of their future state, denounced the move as a de facto rejection of a Quartet proposal for fresh peace talks. The diplomatic grouping had on Friday urged both sides to return to direct talks within a month, with the goal of reaching an agreement by the end of 2012. The Palestinians say they will not return to peace talks without a settlement freeze and have yet to respond to the Quartet's proposal, which is the subject of several leadership meetings in Ramallah on Wednesday and Thursday. In its statement, which is aimed at defusing tensions over a Palestinian bid to secure UN membership, the Quartet urged both sides "to refrain from provocative actions." Around 200,000 Israelis live in occupied east Jerusalem alongside nearly 270,000 Palestinians.