U.S. President Barack Obama's Middle East envoy will return to the region on Sunday as crisis over "Israeli settlement insult" eased after US retreats.

Mitchell on Tuesday put off plans to return to the region, but, Israeli Prime Minister Benjamin Netanyahu praised President Barack Obama on Wednesday after Clinton retreated his condemnation over settlement "insult".

"The Americans have told us that he will come on Sunday," said the Palestinian official, who declined to be named. Palestinian President Mahmoud Abbas would meet Mitchell during his visit, the official said.

Israeli Defence Minister Ehud Barak's office said he spoke by phone on Wednesday with Mitchell, who had originally planned to come on Tuesday.

"They discussed the various means and possibilities for solving the crisis and activating negotiations between Israel and the Palestinians," Barak's office said in a statement.

"In addition, the two discussed the possibility of Mitchell arriving this coming Sunday."

The U.S. embassy said it was aware of the reported conversation but had no information on Mitchell's travel plans.

As of Wednesday, when U.S. Secretary of State Hillary Clinton departed for a meeting of international Middle East mediators in Russia, no response had been received from Netanyahu, a State Department spokesman said.

Israeli announcement to build 1,600 more houses on occupied land emerged hours after the arrival of Biden.

Both Biden and Secretary of State Hillary Rodham Clinton had condemned the move. Clinton, said "Israel's announcement of the project was an insult to the United States."

And she made clear that "the Israeli government needed to demonstrate not just through words, but through specific actions, that they are committed to this relationship and to the peace process."

Israeli media reports said Clinton wanted Israel to shelve the housing plan and agree to discuss core statehood issues with the Palestinians once indirect peace talks began. But, Netanyahu has refused to stop new expansion.

The World Court has ruled all settlements illegal under international law.


Agencies

US in second U-turn over Israel settlement "insults"