Aug. 3 (Bloomberg) -- Israel should drop a plan to build 600 new housing units at its largest West Bank settlement and abide by its commitment to end the expansion of such areas, the U.S. State Department said.

The international peace plan ``calls for an end of all settlement activities, including natural growth,'' State Department spokesman Adam Ereli said yesterday in Washington, according to an e-mailed transcript. ``Israel has made a commitment. We look forward to Israel abiding by that commitment and sticking by the road map'' for peace.

The Israeli Defense Ministry said yesterday it approved the construction of the new units at Ma'aleh Adumim, which lies east of Jerusalem, the Israeli daily newspaper Haaretz reported.

The Middle East peace plan sponsored by the United Nations, the U.S., Russia and the European Union, calls on Israel and the Palestinians to take a series of reciprocal steps leading to the creation of a Palestinian state by 2005. They include a halt to Palestinian attacks against Israel and an Israeli withdrawal from unauthorized settlements in the West Bank and Gaza Strip.

Israel, in the past, has said settlements are only expanded to allow for ``natural growth,'' Haaretz reported. No tenders for building at Ma'aleh Adumim have been issued, the newspaper cited Kobi Bleich, a spokesman for the Housing and Construction Ministry, as saying on its Web site.

The expansion ``is a total defiance of the road map,'' Haaretz cited Saeb Erekat, a Palestinian Authority minister, as saying yesterday. ``Settlements and peace do not go together.''

Talks With Israel

The U.S. has discussed with Israeli Prime Minister Ariel Sharon the need to make progress on the settlement issue ``beginning with the removal of unauthorized settlement outposts,'' Ereli said, according to the transcript.

Sharon has proposed a plan to disengage from the Palestinians, including withdrawing all settlements from the Gaza Strip and four from the West Bank by the end of 2005. The Bush administration supports the plan.

Sharon's initiative ``remains a focal point of our diplomacy to move forward'' on a peace agreement between Israel and the Palestinians, Ereli said.

To contact the reporter on this story: Paul Tighe in Sydney at ptighe@bloomberg.net

Last Updated: August 2, 2004 19:53 EDT