JERUSALEM  Prime Minister Benjamin Netanyahu rejected Sunday an American call to hold off on a planned Jewish housing development in East Jerusalem, saying Israel’s sovereignty over the disputed city could not be challenged.

Mr. Netanyahu issued the statement because State Department officials had raised concerns over the project with Israel’s new ambassador to Washington, Michael Oren, during discussions last week on a range of issues. The American officials suggested that going ahead with the development now would cause problems in negotiations toward a two-state solution to the Israeli-Palestinian conflict.

“I would like to re-emphasize that united Jerusalem is the capital of the Jewish people and of the State of Israel,” Mr. Netanyahu said. “Our sovereignty over it cannot be challenged; this means  inter alia  that residents of Jerusalem may purchase apartments in all parts of the city.”

Israeli officials, speaking on condition of anonymity because of the delicacy of the matter, said the Netanyahu government had gone public with the issue to try to pre-empt further American efforts to stop Jewish building in East Jerusalem. Mr. Netanyahu noted in his statement that there were Arabs living in the predominantly Jewish western part of the city, adding, “We cannot accept the idea that Jews will not have the right to live and purchase in all parts of Jerusalem.”