Jerusalem ? The government of Prime Minister Ariel Sharon has approved construction of 600 homes in Maale Adumim, a large settlement outside Jerusalem, in a move that raises questions about peace negotiations.

A Defense Ministry spokeswoman on Monday confirmed a report in the Maariv newspaper that Israel planned to expand Maale Adumim, a city of nearly 30,000 that is the largest settlement in the West Bank. She declined to elaborate.

The newspaper said the government gave the construction order two months ago but did not announce it to avoid international criticism.

Under the U.S.-backed diplomatic initiative known as the road map, Israel is to freeze settlement activity and remove illegal outposts — smaller offshoots of settlements — erected since March 2001. The Bush administration has expressed frustration over the lack of progress in removing the outposts.

A U.S. official, speaking on condition of anonymity, said the move to build homes at Maale Adumim “appears to be incompatible with” the diplomatic initiative.

Peace activists said expanding Maale Adumim could harm future efforts at a negotiated solution with the Palestinians by further dividing the northern and southern portions of the West Bank.

“It’s another bullet in the cadaver of the road map,” said Dror Etkes, who monitors settlement construction for the Israeli group Peace Now.

In a related development, Defense Minister Shaul Mofaz told Israel Radio that Israel’s separation barrier in and around the West Bank would enclose Maale Adumim and a second large settlement bloc near Jerusalem known as Gush Etzion.

Houses are shown Monday in Maale Adumim, the largest Jewish settlement in the West Bank, near Jerusalem. Ahead of an expected government debate on the issue, Israel's Defense Minister Shau Mofaz has said the settlement should be included inside Israel's contentious separation barrier. The Defense Ministry has granted permission for its expansion.

Palestinian officials charge that the barrier will create a de facto border and effectively appropriate land they want for an independent state. But Israel, which says it needs the barrier to keep out suicide bombers, expects to retain the major settlement blocs under any negotiated agreement — a stance endorsed by President Bush in April.