Asked at a regular media briefing in Westminster whether the UK was considering withdrawing its ambassador, Prime Minister David Cameron's official spokesman said:
We are not proposing to do that. We are not proposing to do anything further at this stage.
We are continuing to have conversations with the Israeli government and others.
We are consulting with international partners and discussing the situation with the Israeli government. Clearly, we are concerned about the situation.
We think that what is being proposed could have a negative impact on the chances of talks and that is concerning to us, but we are not setting out any further action at this stage.
The Israeli ambassador to Paris was also summoned to the French foreign ministry in protest at the settlement move, a foreign ministry spokesman said.
We deplore the recent Israeli government decision to build 3,000 new housing units and unfreeze development in the E1 block.
This threatens the viability of the two state solution.
We have called on the Israeli government to reverse this decision.
The Israeli Ambassador to London, Daniel Taub, has been formally summoned to the Foreign Office this morning by the Minister for the Middle East, Alistair Burt.
The Minister set out the depth of the UK’s concerns.
The statement continued: “Any decision about any other measures the UK might take will depend on the outcome of our discussions with the Israeli government and with international partners including the US and European Union.”
Britain says it summoned Israel's ambassador in London for talks over a planned increase in settlements, according to the Reuters news agency.
Separately, The French Foreign Ministry says "there are other ways to show disapproval" of Israel settlement plans than recalling its ambassador.
Britain and France are understood to be considering a recall of ambassadors in protest against Israel's settlement construction, according to nation's oldest newspaper the Haaretz.
Prime minister Benjamin Netanyahu's decision to build 3,000 homes in settlement blocks and in East Jerusalem could force the hand of European diplomats, the paper said.The unprecedented step is being mooted because of a decision to build in an area known as E1, between Ma’aleh Adumim and Jerusalem.
A statement from the Foreign Office said that the UK approach to the Palestinian resolution at the UN General Assembly was guided by the principal of trying to create the right environment for a swift return to talks.
I am extremely concerned by reports that the Israeli Cabinet plans to approve the building of 3000 new housing units in illegal settlements in the West Bank and East Jerusalem. Israeli settlements are illegal under international law and undermine trust between the parties. If implemented, these plans would alter the situation on the ground on a scale that makes the two state solution, with Jerusalem as a shared capital, increasingly difficult to achieve.
They would undermine Israel’s international reputation and create doubts about its stated commitment to achieving peace with the Palestinians. The UK strongly advises the Israeli Government to reverse this decision. The window for a two-state solution is closing, and we need urgent efforts by the parties and by the international community to achieve a return to negotiations, not actions which will make that harder.
US Secretary of State Hillary Clinton has condemned Israel's plans to build 3,000 new settler homes in the West Bank and East Jerusalem for setting back the Middle East peace cause.
The White House said the latest expansion plan was "counterproductive" to the resumption of direct Israeli-Palestinian talks, a stance that Mrs Clinton expanded on in a later speech in Washington.
"This administration - like previous administrations - has been very clear with Israel that these activities set back the cause of a negotiated peace," Secretary of State Clinton said.
"If and when the parties are ready to enter into direct negotiations to solve the conflict, President Obama will be a full partner to them," she added.
Stevie Wonder has cancelled a planned performance for the Friends of the Israel Defense Forces after several organisations asked him not to perform.
The veteran soul singer, who is also a United Nations Messenger of Peace, was scheduled to sing at a fundraising gala in Los Angeles next Thursday.
But he confirmed he was pulling out in a statement sent by his spokeswoman to Reuters.
"Given the current and very delicate situation in the Middle East, and with a heart that has always cried out for world unity, I will not be performing at the FIDF Gala," Wonder said.
The White House has said that the Israeli settlement expansions plans are counterproductive, making it harder to resume talks between Israel and Palestine.