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 The plans also include future construction in a strategic area of the West Bank where critics have long warned that Jewish settlements would kill hopes for a viable Palestinian state.
Israel's moves served as a harsh reminder to Palestinians -- euphoric over the U.N. upgrade
-- that while they now have a state on paper, most of it remains very much under Israeli control.
"This is a doomsday scenario," Daniel Seidemann of Ir Amim, a group that promotes coexistence in Jerusalem, said of the building plans.
Israel's decision was bound to embarrass the United States, which was among just nine countries in the 193-member General Assembly to vote against accepting Palestine as a nonmember observer state.
Accelerated settlement construction could also set a more confrontational tone as Palestinian President Mahmoud Abbas weighs his next moves.
In Washington, State Department spokeswoman Victoria Nuland criticized the Israeli announcement. "These actions are counterproductive and make it harder to resume direct negotiations or achieve a two-state solution," she said.
Friday's decision was taken by Prime Minister Benjamin Netanyahu and eight senior Cabinet ministers, according to the Israeli news website Ynet.
The plans include 3,000 new apartments in the West Bank and east Jerusalem, as well as preparations for new construction in other large West Bank settlements, including Maaleh Adumim, near east Jerusalem, said an Israeli government official.
Among the projects is an expansion of Maaleh Adumim, known as E-1, said the official, speaking on condition of anonymity because he was not authorized to discuss the decision with reporters.
Successive U.S. administrations have pressured Israel not to build in E-1 because it would effectively cut off east Jerusalem from the West Bank, and split the northern part of the territory from the southern part. Israel has said in the past it envisions 3,500 apartments there.
"E-1 will be the death of the two-state solution," said Seidemann, referring to the establishment of a state of Palestine alongside Israel. "If the pronouncements are to be treated seriously, we are months away from the implementation of E-1. This is very serious and very problematic."
Tzipi Livni, Israel's former foreign minister and chief negotiator with the Palestinians, warned that "the decision to build thousands of housing units as punishment to the Palestinians only punishes Israel ... (and) only isolates Israel further."
Since 1967, the number of Israelis living in settlements in the West Bank and east Jerusalem has risen to half a million, compared with 2.7 million Palestinians in those areas, and continued construction makes partition of the land increasingly unlikely.
The new U.N. observer state status could enable the Palestinians to pursue possible war crimes charges against Israel at the International Criminal Court over settlement construction on war-won land.
In his speech to the U.N. on Thursday, Abbas said he would coordinate with sympathetic countries and act responsibly, suggesting he would not seek confrontation with Israel.
"It is our right to get the membership of the ICC, but we don't want to go to it now," Abbas told reporters in New York on Friday, before the Israeli decision on new settlements became known. "We will not go unless we are attacked."
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 Erekat accused Netanyahu of "defying the whole international community and insisting on destroying the two-state solution."
The U.N. endorsed a Palestinian state in territories Israel captured in 1967. Abbas has said he is ready to negotiate the final borders with Israel, provided Netanyahu drops his refusal to use the 1967 lines as a starting point.
Abbas asserted Friday that a Palestinian demand for a settlement freeze ahead of negotiations still stands.
"I'm ready for negotiations," Abbas said, rejecting Netanyahu's portrayal of the demand for a settlement freeze as a precondition. "Is stopping settlement activities a precondition?" he said. "There are 15 Security Council resolutions that say settlements are an obstacle to peace."
On the Israeli side, compromise on settlements seemed unlikely. Netanyahu is seeking re-election two months from now at the helm of a Likud party turned more hawkish since primaries earlier this week and in an electoral alliance with an ultra-nationalist pro-settler party.
Abbas returns Sunday to the West Bank, where Palestinians are preparing a hero's welcome. The U.N. bid has given a boost to his standing, which has been suffering after years of failed peace efforts with Israel. At the same time, the rival Islamic militant group Hamas in Gaza has scored points domestically, after an eight-day cross-border conflict with Israel earlier this month.
Abbas aides say his top priority is to reconcile with Hamas, which seized Gaza from him in 2007 and has been running its own government there since then. Abbas heads the Palestinian Authority, a self-rule government that administers 38 percent of the West Bank, while he has no say in Israeli-annexed east Jerusalem.
The U.N. vote drew mixed reactions among Palestinians trying to reconcile global recognition with the limitations imposed by Israeli control, including border restrictions in Gaza.
Shahira Taleb, a 45-year-old Gaza housewife who has been unable to visit family in the West Bank because of an Israeli travel ban between the territories, was skeptical.
"I don't know if it's something that will change our life or is just a new paper added to thousands of papers issued over the past years in support of our cause," she said, standing in line at a bakery.
But Talal Jafari, a 47-year-old shopkeeper in the West Bank city of Hebron, said for Palestinians, every victory counts. "The entire world supports us, and that by itself is great for us," he said.
[Associated
Press; By ARON HELLER and KARIN LAUB]
Laub reported from Ramallah. Associated Press writer Mohammed Daraghmeh in Ramallah, West Bank, Nasser Shiyoukhi in Hebron and Ibrahim Barzak in Gaza City contributed reporting.
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