The U.S. Embassy said Monday it was "deeply concerned" by Israeli plans to build hundreds of new homes in West Bank settlements, calling the Israeli enclaves "illegitimate" and an obstacle to resuming direct talks between Israel and the Palestinians.

In a defiant response to a deadly attack on a settler family over the weekend, Israel swiftly approved the construction of between 300 and 500 new homes in major West Bank settlement blocks. Jewish settlement construction is at the crux of the current impasse in peace efforts.

"They murder, we build," Israeli Prime Minister Benjamin Netanyahu said Sunday during a condolence call to the grieving family. Palestinian militants are presumed to have carried out the assault.

The plans for new construction infuriated Palestinians, and together with the attack that killed parents and three of their children, drove prospects for renewed peacemaking even further out of reach. A Netanyahu aide said the Israeli government informed the U.S. _ which has been toiling with little success to break the negotiations deadlock _ of the decision.

"We're deeply concerned by continuing Israeli actions on settlements in the West Bank," the statement from the U.S. Embassy said. "As we said before, we view these settlements as illegitimate and as running counter to efforts to resume direct negotiations."

Just last month, the United States vetoed a U.N. Security Council resolution condemning Israeli settlement construction. The U.S. said it agreed with the wider world about the illegitimacy of continued Israeli settlement activity but thought Israelis and Palestinians should resolve key conflicts between them. The council's 14 other members voted in favor of the resolution.

A senior Israeli official responded to the U.S. criticism by reasserting Israel's expectation that the major settlement blocs, where most of the 300,000 West Bank settlers live, will remain in Israeli hands under any final peace accord.

"There is no contradiction in building inside existing blocs and the desire to move ahead in peace and for a solution of two states for two peoples," the official said, speaking on condition of anonymity because he was not authorized to discuss the U.S. response on the record.

An additional 200,000 settlers live in east Jerusalem, captured along with the West Bank from Jordan in the 1967 Mideast war. The Palestinians want both territories, along with the Hamas-ruled Gaza Strip, for their future state.

Disputes over settlement construction have driven peacemaking into a virtual standstill for the past two years. Palestinians refuse to negotiate until Israel halts all building on occupied territories. Israel says negotiations should not be held hostage to conditions and note that previous rounds of talks took place while construction proceeded.

Israeli officials had accused Palestinian President Mahmoud Abbas of only tepidly condemning the carnage in the settlement of Itamar. And they indirectly blamed his government for the attack, calling it the product of incitement against Israel that the Palestinian Authority allows.

In a rare interview to Israeli media broadcast earlier Monday, Abbas condemned the attack as "despicable, immoral and inhuman." He said his government would have prevented the assault if it had had advance knowledge, and that he would not permit attacks to multiply.

But Abbas rejected Israel's allegations that Palestinian clerics preach incitement, saying his government hands out a uniform sermon to be delivered by all. And he called for a joint Israeli-Palestinian-U.S. team to examine claims of incitement in Palestinian textbooks.

Israel has long contended that Palestinian textbooks and official media preach hatred toward Israel and that the killers of Israelis are often glorified.

On Sunday, a group of activists from Abbas' Fatah movement dedicated a square in the West Bank city of Ramallah after Dalal Mughrabi, a female militant who carried out a 1978 bus attack that killed 37 Israelis. Aides to Abbas said they tried to stop the ceremony and the move was not officially sanctioned.

Still, Israel has not produced evidence that incitement contributed to the killings. The military has taken several people into custody in connection with the attacks but has provided no further details.

The Al-Aqsa Martyrs' Brigades, a near-defunct militant group with loose ties to Fatah, claimed responsibility for the attack, but neither Israeli nor Palestinians officials took the claim seriously. Abbas said Palestinian security officials were working with Israel to find the assailant.