The Middle East quartet has strongly denounced Israeli moves to build 1,600 new homes in East Jerusalem and urged the Israeli government and Palestinians to resume peace negotiations.

In a hard-hitting statement after a meeting in Moscow, the UN, the EU, Russia and the US condemned Israel's "unilateral" construction plans and said the status of Jerusalem could only be resolved through negotiations between both parties.

The UN secretary general, Ban Ki-moon, said: "The quartet condemns the decision by the government of Israel to advance planning for new housing units in East Jerusalem."

The quartet expected that talks between Israelis and Palestinians should lead to a negotiated settlement that "within 24 months" ends the occupation of Palestinian territories begun in 1967. The settlement should result "in the emergence of an independent, democratic, and viable Palestinian state living side by side in peace and security with Israel and its other neighbours".

The quartet includes Hillary Clinton for the US; Russia's foreign secretary, Sergei Lavrov; Tony Blair, the quartet's special representative; and Lady Ashton, the EU foreign policy chief.

The statement expressed deep alarm at the deteriorating situation in Gaza, urging Israel to lift its blockade of the Gaza Strip for both humanitarian and commercial traffic and calling for a "durable resolution to the Gaza crisis".

Clinton said she had spoken last night to the Israel prime minister, Binyamin Netanyahu, following his apparent offer of "confidence-building measures" to encourage the renewal of peace talks. She described the conversation as "very useful and productive … We don't believe unilateral action by any parties are helpful. We've made this clear."

None of the quartet parties were willing to say what pressure they were prepared to put on Israel should it ignore today's statement.

The quartet called on Israel to freeze all settlement activity "including natural growth", to dismantle outposts erected since March 2001, and to "refrain from demolitions and evictions in East Jerusalem". It also appealed for the international community to back the Palestinians' commitment to build an independent state by offering immediate and concrete support.

A statement from Netanyahu's office said he proposed a series of steps that would make it easier for the Palestinians to join the talks. He did not specify what these would be, but they could include easing Israeli roadblocks in the West Bank, the withdrawal of Israeli troops from more parts of the West Bank and the release of Palestinian prisoners.

He did not announce, as the US had demanded, a freeze on the construction of Jewish homes in Ramat Shlomo in East Jerusalem, the key sticking point.

But diplomats in Washington, Moscow and Jerusalem said Netanyahu had privately promised a temporary freeze on new construction. The work, while not cancelled, is to be postponed for several years.

The Israeli ambassador to the US, Michael Oren, told the Washington Post: "The goal of both sides at this point is to put this behind us and go forward with the proximity talks as quickly as possible."

This morning Ban said the Israeli government had approved several long-standing UN humanitarian programmes in Gaza, including a water and sanitation project, a flour mill, temporary schools and 150 houses. The UN secretary general said he would be travelling to Gaza on Sunday to see the situation on the ground there himself, following yesterday's visit by Lady Ashton. The EU foreign policy chief is understood to have been shocked by her trip to Gaza, privately describing it as "worse than Haiti".

Asked about her phone conversation with Netanyahu, Clinton today struck a more conciliatory note following her comments last week that Israel's building plans for East Jerusalem – announced during a visit by the US vice-president, Joe Biden – were "insulting". Of US-Israeli ties, she said: "Our relationship is ongoing. It is deep and broad. It is strong and enduring."

She went on: "We believe that the launch of the proximity talks is very much in Israel's interests, as it is in the interests of the Palestinians. We hope to see these talks commence as soon as possible."

A US state department spokesman, PJ Crowley, said Clinton and Netanyahu had discussed "specific steps" to improve the outlook for Middle East peace talks. Netanyahu's spokesman, Nir Chefetz, said the prime minister had proposed "mutual confidence-building steps" that both Israel and the Palestinians could take.

Last night Israel retaliated for a Palestinian rocket attack that killed a Thai agricultural worker. Israeli planes struck at least two targets in Gaza, officials and witnesses said.

The quartet condemned yesterday's rocket attack from Gaza and called for "an immediate end to violence and terror and for calm to be respected". It also urged the release of the captive Israeli soldier Gilad Shalit.