Israel's prime minister tried to play down a serious diplomatic dispute with the United States on Sunday, urging calm after another stern rebuke from Washington over plans to build 1,600 new apartments for Jews in contested east Jerusalem.

Reflecting the high tension, Israel deployed hundreds of security forces around Jerusalem's Old City, the scene of clashes with Palestinian protesters in recent days. The Israeli military also extended an order barring most Palestinians from entering Israel from the West Bank.

Israel's already strained relationship with the U.S. hit a new low last week when it announced the construction plans during a visit by Vice President Joe Biden. The timing of the announcement deeply embarrassed the Obama administration and put plans for indirect peace talks with the Palestinians in jeopardy.

The U.S. responded with repeated condemnations, including a lecture from Secretary of State Hillary Rodham Clinton over the weekend. A senior White House official added another stinging rebuke on Sunday.

Netanyahu has been trying to dispel the impression that relations with the U.S. have degenerated into a crisis. His attempt Sunday to ease concerns were his first public comments since the feud erupted.

"We opened the newspapers this morning and read all kinds of commentary and assumptions regarding the crisis with the U.S. I recommend not to get carried away and to calm down," Netanyahu told his Cabinet. "There was a regrettable incident that was done in all innocence and was hurtful, and which certainly should not have occurred."

Netanyahu, however, gave no indication that he would cancel the east Jerusalem construction plan, despite warnings from Washington that it could undermine the negotiating climate as indirect peace talks between Israel and the Palestinians are about to begin under U.S. mediation.

"Israel and the U.S. have mutual interests," Netanyahu told the Cabinet, then pointedly added, "but we will act according to the vital interests of the state of Israel."

After working for more than a year to get peace talks back on track, the U.S. viewed the Israeli construction plan as a provocative move that could derail the negotiations before they even get under way.

Biden condemned the plan, using exceptionally harsh diplomatic language. But at the end of his visit Thursday, he toned down that criticism in an apparent effort to keep the feud from escalating.

Clinton shattered the newfound calm a day later by calling the new housing plan a "deeply negative signal" for Mideast peacemaking and ties with the U.S.

She spoke to Netanyahu by phone for 43 minutes to vent Washington's frustration with the announcement and its timing.

"The announcement of the settlements on the very day that the vice president was there was insulting," Clinton told CNN on Friday.

On Sunday, Obama adviser David Axelrod also had sharp words for the Israeli announcement.

"This was an affront, it was an insult, but most importantly, it undermined this very fragile effort to bring peace to that region," he said on NBC television. "For this announcement to come at that time was very, very destructive."

Palestinians have threatened not to participate in the indirect talks, which Washington hopes will relaunch long-stalled peace efforts, and the Arab League has already withdrawn its endorsement of the negotiations. Palestinians want Israel to halt all construction in the West Bank and east Jerusalem, areas they claim for a future state along with the Hamas-ruled Gaza Strip.

Israel, which captured both territories in 1967, has agreed under intense U.S. pressure to slow construction in the West Bank. But it has refused to limit building in east Jerusalem, which it annexed after the 1967 Mideast war in a move that has not been recognized by the international community.

The spat between Israel and the U.S. over the new east Jerusalem construction plans has fueled already high tension in the city, where Arabs and Jews live together uneasily.

After successive weekends of clashes between Israeli security forces and Palestinians, hundreds of police were deployed Sunday around the Old City before the rededication Monday of an important synagogue destroyed during Israel's 1948 War of Independence.

Palestinian men under the age of 50 were barred from entering the disputed hilltop compound known to Jews as Temple Mount and to Muslims as Haram as-Sharif, or Noble Sanctuary. The disputed complex is home to the Al-Aqsa Mosque, Islam's third-holiest shrine, and is Judaism's holiest site because the biblical Jewish temples once stood there.

Security forces asked younger Arab men to produce identification before allowing them to enter the gates of the Old City.

In the West Bank, Israel arrested a leading member of the Hamas militant group's military wing on Saturday night.

The military said Maher Udda was wanted for more than a decade for his involvement in attacks that killed more than 70 Israelis. Among them was an American-born doctor who headed an emergency room, David Appelbaum, and his daughter, who were killed in a 2003 suicide bombing at a restaurant on the night before her wedding.