Jerusalem ? Israel announced plans Tuesday to build more than 1,000 homes in disputed east Jerusalem, infuriating the Palestinians and triggering a new crisis in already troubled peace talks.

Palestinian officials accused Israel of undermining efforts to reach a peace agreement by the end of the year and urged a halt to the project.

The fate of east Jerusalem is the thorniest issue in the peace talks. Israel captured the area in the 1967 Middle East war, later formally annexing it and building a string of neighborhoods that are now home to 180,000 Israelis.

Israel expects to retain Jewish neighborhoods in east Jerusalem under a peace deal, but the Palestinians see construction there as threatening a final agreement.

The Palestinians claim east Jerusalem as the capital of a future independent state and have been urging Israeli Prime Minister Ehud Olmert to halt construction in the area.