Israeli prime minister Binyamin Netanyahu has reportedly told the US administration that his government will not stop settlement construction in east Jerusalem, despite US pressure and long-running deadlock in peace talks.

The message was delivered to US officials at the weekend, according to reports by AP and the Wall Street Journal, and comes ahead of a visit to the Middle East by George Mitchell, the US special envoy, later today.

Mark Regev, a spokesman for Netanyahu, would not discuss the details of Israel's talks with the US administration but he said: "We want this process to succeed and to see the restart of talks. We hope that this is possible soon."

Earlier this week Netanyahu insisted again that construction in east Jerusalem would continue. "The Palestinian demand is that we prevent Jews from building in Jewish neighbourhoods in Jerusalem. That is an unacceptable demand. If we made it in London or made it in New York or in Paris, people would cry foul," he told US television network ABC.

He admitted there were outstanding issues with the US. "We're trying to resolve them through diplomatic channels in the best way that we can," Netanyahu said.

Relations between Israel and the US sank to a new low last month, after a tense meeting between Netanyahu and President Barack Obama in Washington. Details of their discussion have not emerged, but it appeared Obama wanted Israel to stop building in Jewish settlements in east Jerusalem as a prelude to restarting peace talks with the Palestinians. The Palestinian leadership says it will not return to talks without a full halt to settlement construction, in line with the US roadmap. There have not been direct peace negotiations between the two sides since before Israel's war in Gaza early last year.

Israel claims sovereignty over east Jerusalem, which it captured in the 1967 war and later annexed, and Netanyahu has insisted construction must continue there. Internationally, east Jerusalem is regarded as under Israeli military occupation and settlement on occupied land is illegal under international law.

The US administration spent much of last year trying to convince Netanyahu to halt all settlement construction. Netanyahu refused and agreed only to a 10-month, partial halt to construction in the West Bank - a moratorium which expires this autumn. Mitchell then spent many months trying to prepare indirect negotiations between Israel and the Palestinians, but a day after an agreement on so-called "proximity talks" was announced, Israeli officials gave approval for 1,600 new homes in an east Jerusalem settlement during a visit by the US vice president, Joe Biden. Biden condemned the decision and the indirect talks collapsed before they had begun.

Israel has yet to restore its relations with the US and a refusal by Netanyahu to halt east Jerusalem settlement building would only prolong the confrontation. However, the Wall Street Journal said Netanyahu would offer other incentives instead, including the release of Palestinian prisoners from Israeli jails, the lifting of some checkpoints on the occupied West Bank and allowing some more goods to enter Gaza, despite the long Israeli economic blockade.

Saeb Erekat, the chief Palestinian negotiator, said he hoped Mitchell would bring the right formula to allow indirect talks to start. Mitchell is expected to hold meetings with Israeli and Palestinian leaders from tomorrow.

Several US officials have emphasised the importance for the US of progress in Israeli-Palestinian peace negotiations. Jim Jones, the national security adviser, indicated this week that progress in the Middle East would help Washington curb Iranian nuclear ambitions. "Advancing this peace would ... help prevent Iran from cynically shifting attention away from its failures to meet its obligations," he said.

Israel has long argued that confronting Iran ought to be an international priority. But Avigdor Lieberman, the Israeli foreign minister, this week resisted any suggestion that a peace agreement should be imposed on Israel and the Palestinians.

"Any attempt to force a solution on the parties without establishing the foundation of mutual trust will only deepen the conflict," Lieberman told diplomats in Jerusalem .