U.S. President Barack Obama has asked Israeli Prime Minister Benjamin Netanyahu to take "steps that build confidence" in the Middle East peace process.
White House press secretary Robert Gibbs said Wednesday the president and Mr. Netanyahu had "honest and straightforward" talks about regional security, comprehensive peace efforts and the relationship between the U.S. and Israel.
The talks at the White House late Tuesday came as Israel gave final approval for 20 new settler homes in East Jerusalem, in a move that further complicates peace efforts.
Mr. Netanyahu's office said Wednesday that there are no limits to real estate deals in Jerusalem, adding that "Jews and Arabs can buy and sell private property freely in all the city."
The Obama administration condemned Israel earlier this month for announcing plans to build 1,600 homes for Jews in mainly Arab East Jerusalem, which is claimed by Palestinians as a future capital.
United Nations Secretary-General Ban Ki-moon reiterated Wednesday that Israeli settlements in East Jerusalem are illegal under international law and must stop immediately.
The U.N. chief made the statement after briefing the Security Council on last week's meeting with the Quartet of Mideast peace mediators and his visit to Israel and the Palestinian territories.
U.S. Middle East envoy George Mitchell will meet with the Israeli leader in Washington later Wednesday.
Israeli officials on Wednesday downplayed the latest announcement to build 20 apartments at the site of an old hotel, calling the move a procedural step in a project that technically was approved last year.
Israel captured East Jerusalem in a 1967 war and annexed it in a move not recognized internationally.
Mr. Netanyahu declared Monday that Jerusalem is Israel's capital, not a settlement. He rejected the Obama administration's assertion that building in East Jerusalem endangers U.S. efforts to launch indirect Israeli-Palestinian peace talks.
Saudi Arabia on Wednesday condemned Mr. Netanyahu's remarks as "arrogant," and accused him of disregarding Palestinian, Arab and Muslim rights in Jerusalem. State media said Riyadh has asked the international Quartet of Mideast peace mediators to clarify Israel's position.
Some information for this report was provided by AFP, AP and Reuters.