Israel gave the green light today for a plan denounced by Washington to build 1,500 settler homes in annexed east Jerusalem, prompting the Palestinians to warn they would seek a UN Security Council meeting on the issue.

Interior ministry spokeswoman Efrat Orbach said the ministry’s planning committee had given developers the go ahead but told applicants to trim their request to build 1,600 new housing units at Ramat Shlomo to 1,500 and resubmit it “for final approval”.

The Palestinian leadership responded by saying it would seek a Security Council meeting on the Israeli plans to build the new settler homes.

The leadership was on the verge of “important and necessary measures against Israel’s settlement building, including recourse to the UN Security Council, to prevent implementation of these decisions,” president Mahmud Abbas’s spokesman Nabil Abu Rudeina said.

Top Palestinian negotiator Saeb Erakat urged the US administration to “vote for Palestinian resolutions that will be submitted to the Security Council against Israeli settlements.”

The Israeli plan caused a diplomatic rift with Washington when it was first announced in 2010 as US Vice President Joe Biden met top officials in Jerusalem to boost Israeli-Palestinian peace talks.

It has lain dormant since August 2011 but two weeks ago the ministry announced that it had been revived.

Orbach said that the planning committee at a meeting on today heard public objections and was told to make changes.

“It reduced the plan from 1,600 to 1,500 and now the plan has to be resubmitted and meet the conditions in order to get final approval,” she said. “It could take months more, or years.”

Ramat Shlomo is a Jewish settlement in the mainly Arab eastern sector of Jerusalem which Israel seized in 1967 and later annexed in a move not recognised by the international community.

Today’s announcement will only add to international discontent caused by a separate Israeli decision to plan 3,000 more settler homes in the West Bank and east Jerusalem after the Palestinians won upgraded status at the UN last month.

Some of that construction is to take place in a controversial corridor of land east of Jerusalem called E1, which critics say could effectively cut off the northern West Bank from the south, and ultimately threaten the territorial contiguity and viability of a future Palestinian state.

Last week, Abbas warned that the Palestinians could pursue Israel at the International Criminal Court (ICC) if it builds the new settler homes in the highly sensitive E1 area.

During a meeting today in Rome, Italian Prime Minister Mario Monti and the Palestinian president “denounced the Israeli decision to build 3,000 new houses in east Jerusalem settlements,” the Italian government said in a statement.

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