With the Middle East peace process faltering, Israel is seeking to tighten its grip on Jerusalem.
Israeli Prime Minister Benjamin Netanyahu convened his Cabinet in Jerusalem's disputed Old City, instead of the usual meeting place in West Jerusalem. The message was clear: Jerusalem will not be divided with the Palestinians.
Netanyahu said the world should know that the people of Israel are faithful to Jerusalem and their heritage.
He said Israel's position on a united Jerusalem is firm, and its hand is stretched out in peace to its Arab neighbors.
But the Arabs say there cannot be peace unless Israel relinquishes East Jerusalem, including the Old City, which were captured from Jordan during the Six Day War in 1967. Israel has refused, so on Saturday the Arab League decided to seek United Nations recognition of a Palestinian state in September.
Both Israel and the United States oppose the move, saying peace can only be achieved through negotiations and not through unilateral steps. But the Palestinians say resuming peace talks is useless because of Israel's refusal to stop settlement expansion and accept a Palestinian state based on the 1967 borders.
Palestinian official Saeb Erekat called for the United Nations "to respond to such Israeli unilateralism by declaring their recognition of the State of Palestine on the '67 lines with East Jerusalem as its capital."
At the Cabinet meeting, Prime Minister Netanyahu said Jerusalem has flourished during the 44 years of Israeli rule. He said the government is allocating $115 million to promote economic development and tourism in the city.
On Wednesday, Israel celebrates Jerusalem Day, marking the reunification of the city during the 1967 war.