The EU on Monday urged Israelis and Palestinians to avoid any actions that could undermine the resumption of peace talks after a three-year negotiating impasse.

The spokesman for European Union foreign affairs head Catherine Ashton warned that fresh Israeli approvals for settlements in the West Bank announced on Sunday threatened to render peace talks with Palestinians "impossible".

"Israeli settlements in the West Bank are illegal under international law and threaten to make a two-state solution to the Israeli-Palestinian conflict impossible," Michael Mann told a regular news briefing.

In a statement, Ashton's office welcomed the resumption of peace negotiations in Jerusalem.

At the same time, "the European Union urges all parties to refrain from actions which could undermine the negotiation process and the prospects of peace."

Israel on Sunday announced tenders for the construction of 793 housing units in annexed east Jerusalem and 394 elsewhere in the West Bank.

Media reports have suggested that the announcement was meant to appease Israeli Prime Minister Benjamin Netanyahu's far-right coalition partners, who oppose the release of Palestinian prisoners.

In a parallel announcement on Sunday, Israel said it will release 26 veteran Palestinian prisoners, likely before the talks begin in Jerusalem on Wednesday.

The 26 constitute the first batch of a total of 104 long-term Palestinian and Israeli Arab prisoners to be freed in four stages, depending on progress in the talks.

Mann stressed that both Israel and the Palestinians need to show a "sustained willingness to engage in good faith" if the latest talks are to produce "tangible and timely progress."

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