Israel is trying to ease tensions with the United States amid a fresh controversy over Jewish settlement expansion.
Israeli Prime Minister Benjamin Netanyahu has expressed regret for the announcement of a Jewish settlement plan in disputed East Jerusalem that strained ties with Washington.
Mr. Netanyahu told the Cabinet it is regrettable the announcement to build 1,600 Jewish homes in an East Jerusalem neighborhood was made without his knowledge during last week's visit of U.S. Vice President Joe Biden.
Secretary of State Hillary Clinton made an angry phone call to Mr. Netanyahu on Friday and said the announcement was an insult that harms the peace process and ties with the United States.
Israeli commentators describe the timing of the settlement announcement as a fiasco, and newspapers speak of a full-blown crisis with Washington. But Mr. Netanyahu sought to play that down.
"I recommend not to get carried away and to calm down," he said.
Mr. Netanyahu said the "most important thing is that Israel and the United States have important mutual interests."
But relations between the two countries have soured since President Barack Obama took office more than a year ago and demanded a complete freeze on Jewish settlement expansion.
Israel refused, but eventually imposed a partial freeze on settlement construction in the West Bank. The freeze does not apply to East Jerusalem which Israel sees as part of its undivided capital, and which the Palestinians claim as the capital of their future state.
In the wake of the Israeli announcement, the Palestinians have back-tracked on an agreement to begin indirect peace talks after a 14-month stalemate. U.S. Envoy George Mitchell will return to the region this week, to try to get Israel and the Palestinians back to the negotiating table.