Washington, Oct 28 (IANS): The US is "deeply concerned" by reports that Israel would build more settler homes in east Jerusalem, the state department has said.

"Israel's leaders have said they would support a pathway to a two-state solution, but moving forward with this type of action would be incompatible with the pursuit of peace," state department spokeswoman Jen Psaki said in a regular briefing Monday.

Israeli Prime Minister Benjamin Netanyahu has decided to advance plans for 1,060 housing units in Jewish neighbourhoods in east Jerusalem, a source in the prime minister's Office confirmed to Xinhua Monday.

Psaki said US embassy officials were engaging with the Israeli government on the issue.

"We continue to make our position absolutely clear that we view settlement activity as illegitimate and unequivocally opposed unilateral steps that prejudge the future of Jerusalem," Psaki said.

The spokeswoman, however, reaffirmed the strong relations between the US and Israel, saying the ties were "unshakable".

"There are times when we disagree with actions of the Israeli government," she said. "It does not mean that we don't have a strong and formidable relationship that continues."