Israel plans to build thousands of new homes for its settlers in the occupied West Bank and East Jerusalem, an Israeli official said today.

The move has been seen as defying a UN vote that implicitly recognised Palestinian statehood in the region.

The official, speaking on condition of anonymity, said Prime Minister Benjamin Netanyahu's conservative government had authorised the construction of 3,000 housing units and ordered "prelimiliary zoning and planning work for thousands" more.

The official would not elaborate. But Israeli media said the government sought to hammer home its rejection of yesterday's upgrade, by the UN General Assembly, of the Palestinians to "non-member observer state" from "entity".

Israel and the United States had opposed the resolution, which strenghtened the Palestinians' claim on all of the West Bank, East Jerusalem and Gaza, saying territorial sovereignty should be addressed in direct peace talks with the Jewish state.

Those negotiations have been stalled for two years, however, given Palestinian anger at continued Israeli settlement.

The Israelis insist they would keep West Bank settlement blocs under any final accord as well as all of Jerusalem as their capital.

That status for the holy city has never been accepted abroad, where most powers consider the settlements illegal for taking in land captured in the 1967 Middle East war.

The 193-nation UN General Assembly overwhelmingly approved the de facto recognition of the sovereign state of Palestine after Palestinian President Mahmoud Abbas urged the world body to issue what he said was its long overdue "birth certificate".

Meanwhile, the Vatican has hailed the United Nations' implicit recognition of a Palestinian state and called for an internationally guaranteed special status for Jerusalem.

Palestine now has the same status as the Vatican.

A statement said: "The Holy See welcomes with favour the decision of the General Assembly by which Palestine has become a Non-member Observer State of the United Nations,"

It also said it was a "propitious occasion" to recall a "common position" on Jerusalem expressed by the Vatican and the Palestine Liberation Organisation when the two sides signed a basic agreement on their bilateral relations in 2000.