Israel has approved building nearly 1,200 more settlement homes and prepared the release of more than two dozen long-held Palestinian prisoners.
The move highlights an apparent settlements-for-prisoners trade-off that got both sides back to peace talks after a five-year freeze.
Yet concerns were mounting, especially among Palestinians, that the price is too steep.
Sunday's announcement was Israel's third in a week on promoting Jewish settlements on war-won lands the Palestinians want for a state. It fuelled Palestinian fears of a new Israeli construction spurt under the cover of US-sponsored negotiations.
In Israel, the most vocal protests came from relatives of those killed in attacks carried out by Palestinians slated for release.
Bereaved relatives held up large photos of their loved ones during a Supreme Court hearing on an appeal against the upcoming release. "Why are we releasing butchers now? What for?" asked Gila Molcho, whose brother, lawyer Ian Feinberg, was stabbed to death by Palestinians who broke into a European aid office in Gaza City in 1993.
Israelis and Palestinians are to launch talks on Wednesday in Jerusalem, following a preparatory round two weeks ago in Washington. The US envisions an agreement within nine months on the terms of a Palestinian state alongside Israel, including drawing a border, agreeing on security arrangements and deciding the fate of Palestinian refugees.
The Palestinians want a state to include the West Bank, Gaza and east Jerusalem, territories Israel captured in the 1967 Mideast war. However, they are willing to swap some West Bank land for Israeli territory to allow Israel to annex some of the largest Jewish settlements. In all, Israel has built dozens of settlements since 1967 that are now home to some 560,000 Israelis.
The diplomatic paralysis of the last five years was largely due to disputes over the settlements, deemed illegal by most of the international community.
Palestinian President Mahmoud Abbas long insisted he will only resume talks if Israel freezes construction. Israeli Prime Minister Benjamin Netanyahu rejected a freeze. Abbas, under pressure from Kerry, eventually dropped it as a condition for talks.
In exchange, Kerry won Israeli agreement that it will release 104 Palestinian prisoners serving long sentences, many for involvement in killing Israelis.
The prisoners are to be freed in four stages during the negotiations, with the first group of 26 to be released on Tuesday.
Meanwhile, Israeli Housing Minister Uri Ariel announced today that he has given final approval for the construction of 1,187 apartments in settlements. Nearly 800 are in east Jerusalem and the rest in the West Bank.
Israeli government spokesman Mark Regev said the construction was approved in areas that Israel expects to retain in any future peace deal. "There is no way it changes the final map of peace," he said. "It changes nothing."
The Palestinians responded angrily, but stopped short of walking away from the negotiations.
"It is clear that the Israeli government is deliberately attempting to sabotage US and international efforts to resume negotiations," Palestinian negotiator Mohammed Shtayyeh said. "Israel continues to use peace negotiations as a smoke screen for more settlement construction."
Shtayyeh said the Palestinians would complain to the US and Europe. The main US mediator in the talks, Martin Indyk, met Abbas today at his compound in the West Bank city of Ramallah.
Today's announcement was Israel's third in a week on pushing settlement plans.