Israel's ambassadors in Paris and London have been summoned for consultations by France and the UK over Israel's plans to build more settler homes in East Jerusalem and the West Bank.

An Israeli embassy spokesperson confirmed that its Paris ambassador Yossi Gal had been summoned by the French foreign ministry, Al Jazeera reported.

The British foreign office also in a statement confirmed that the Israeli envoy in London had been summoned.

The British Foreign Office said on Monday it was considering a "strong reaction" to Israel's plans to build new settler homes, amidst speculation it could recall its ambassador to Israel.

"The Foreign Secretary (William Hague) has consistently made it very clear that settlement building, such as the recent Israeli government decision to build 3,000 new housing units, threatens the two-state solution and makes progress through negotiations harder to achieve," a Foreign Office spokesman said, as quoted by international media.

"We have called on the Israeli government to reconsider. We have told the Israeli government that if they go ahead with their decision, then there will be a strong reaction."

Reports of a decision by Israel to build the homes in East Jerusalem and the West Bank emerged Friday, with an official source confirming it was in retaliation for the Palestinians winning the rank of a UN non-member state a day earlier.

The decision to build in a key area east of Jerusalem, called E1, sparked a storm of diplomatic protest from Washington and Brussels as well as from UN chief Ban Ki-moon, who on Sunday warned it would deal an "almost fatal blow" to the prospects of resolving the conflict.

E1 is a highly contentious area of the West Bank that runs between the easternmost edge of annexed east Jerusalem and the Maaleh Adumim settlement.

Palestinians bitterly oppose the project, as it would effectively cut the occupied West Bank in two, north to south, and sever it from Jerusalem, and make the creation of a viable Palestinian state even more problematic.

Ban Ki-moon, UN secretary-general, gave warning on Sunday that any Israeli move to revive that project would deal an "almost fatal blow" to any prospects for peace.

"It was with grave concern and disappointment that the secretary general learned of Israel's announcement of 3,000 new settlement units in east Jerusalem and other parts of the West Bank," a statement from Ban's spokesperson said.