JERUSALEM (AFP) - Israel will never agree to limit its construction activity in annexed east Jerusalem, Foreign Minister Avigdor Lieberman said on Sunday.

"One thing should be clear: we will never accept the definition of building in Jewish neighbourhoods of Jerusalem as settlement activity," he said at a news conference with his German counterpart Frank-Walter Steinmeier.

"We won't accept any limitation on building in Jewish areas of (east) Jerusalem," he said.

His remarks came four days after Israel approved plans to build 200 homes in Ramot in occupied east Jerusalem despite months of almost daily clashes and tensions there with Palestinians, triggered in part by settlement expansion.

The announcement prompted a sharply-worded rebuke from Washington which reiterated its "unequivocal" opposition to such construction in east Jerusalem, warning it could "exacerbate this difficult situation on the ground and... will not contribute to efforts to reduce the tension."

Israel seized east Jerusalem during the 1967 Six-Day War and later annexed in a move never recognised by the international community.

It refers to the entire city as its "united, undivided capital" and does not view construction there as settlement activity.

The Palestinians want the city's eastern sector as capital of their promised state and vehemently oppose any Israeli attempt to expand construction there.