The U.S. says it has no information indicating Palestinians have decided to withdraw from planned indirect talks with Israel.
State Department spokesman P.J. Crowley said Thursday he does not think a report about a Palestinian pull-out is accurate.
On Wednesday, Arab League chief Amr Moussa said Palestinian President Mahmoud Abbas had told him he would not enter the talks due to Israel's announcement of a settlement expansion in occupied East Jerusalem.
Chief Palestinian negotiator Saeb Erekat said Thursday Palestinians would not begin indirect talks with Israel until the government annulled plans to build the homes. He said Palestinians want to hear the news from U.S. Middle East envoy George Mitchell.
Israel announced plans to build 1,600 homes in the city Tuesday -- as U.S. Vice President Joe Biden met with officials in Israel to promote the U.S. plan for indirect peace talks.
Vice President Biden says the talks between Israelis and Palestinians should begin immediately, despite Israel's controversial plan.
Speaking at Tel Aviv University Thursday, he said the talks should go forward because, as he put it, "...when progress is postponed, extremists exploit our differences."
The vice president earlier condemned the Israeli government's approval of the settlement project.
He also said Israel's prime minister, Benjamin Netanyahu, had assured him that the project would not begin for several years, giving Israeli and Palestinian negotiators time to try to resolve the issue.
Biden ended his trip to Israel and the Palestinian territories Thursday and traveled to Jordan where he discussed Mideast peace with King Abdullah.
King Abdullah denounced Israel's expansion plans saying the move could push the entire region into a new cycle of conflict.
Mr. Netanyahu expressed "regret" about the timing of the settlement announcement but has given no indication he intends to rescind the decision.
Israel annexed East Jerusalem following its capture in the 1967 Arab-Israeli War, a move not recognized by the international community. Israel claims all of Jerusalem as its "eternal capital," while Palestinians say East Jerusalem should be the capital of a future Palestinian state.
U.S. pressure last year led Israel to agree to a 10-month partial freeze on settlement construction in the occupied territories, but Israel exempted East Jerusalem from the freeze.