(CNN) -- Israel is forging ahead with a plan to construct 900 housing units in East Jerusalem, officials said Tuesday -- a day before fragile peace talks with Palestinians were set to resume.

Israeli settlements have been a tinderbox in peace negotiations, but one Israeli official says the latest construction boom is only the beginning.

"As the population of Jerusalem naturally expands and grows in the coming years, Jerusalem will need to build tens of thousands of new housing units throughout the city to accommodate all sectors," said Brachie Sprung, an adviser to the Jerusalem mayor.

"New construction in Jerusalem, like in cities across the world, is a normal process needed to sustain the city's growth and to allow young people and students to rent and purchase homes."

Israeli officials gave final approval Monday to build about 900 new settlement units in East Jerusalem.

An Interior Ministry committee approved the plan to build in the Gilo neighborhood south of Jerusalem. "Based on that plan, the neighborhood will expand towards Beit Gala," the Israel Broadcasting Authority said.

That's on top of the 1,000 new settlement units announced by Housing Minister Uri Ariel on Sunday.

"The Israeli government is lowering the cost of living in all parts of Israel," he said. "No country in the world will accept dictates from other countries where it is allowed to build and where not to."

Intense criticism

Such plans have drawn fire from critics -- including within Israel -- who say construction on disputed territory could derail upcoming Israeli-Palestinian peace talks.

"(Israeli Prime Minister Benjamin) Netanyahu has to decide which government he is heading: a government that is trying to reach a peace agreement, or a government that is trying to undermine all possibilities of this agreement," said Shelly Yachimovich, head of the Labor Party and the Israeli opposition.

In January, the United Nations Human Rights Council said Israeli settlements amount to "creeping annexation" of Palestinian territories by Israel and have taken a "heavy toll" on the rights and sovereignty of Palestinians.

Israel offers prisoner release

As the Israeli-Palestinian negotiations neared, Israeli officials approved the release of 26 Palestinian prisoners, which is expected to happen sometime this week.

Netanyahu prodded the Israeli government into approving the release to help set up the revived talks.

But as officials approved the move Sunday, a committee of Israeli Cabinet ministers stressed "that if any of the released prisoners return to hostile activity against the state of Israel, they will be returned to continue serving their sentences."

CNN's Saad Abedine, Michael Schwartz, Kareem Khadder and Tom Cohen contributed to this report.