Israeli Prime Minister Benjamin Netanyahu has cancelled plans to build 20,000 new settler homes in the West Bank, hours after their announcement sparked US and Palestinian criticism.
Netanyahu ordered Israeli Housing Minister Uri Ariel "to reconsider all of the steps for evaluating planning potential [for the settler homes] that he distributed without any advance co-ordination", a statement from Netanyahu's office said.
Netanyahu told Ariel the plan was "meaningless" legally - "and an action that creates an unnecessary confrontation with the international community at a time when we are making an effort to persuade elements in the international community to reach a better deal with Iran", according to the statement.
Ariel was said to "accede" to Netanyahu's "request".
The prime minister's order came after Palestinian president Mahmoud Abbas warned the construction plans, announced on Tuesday by Ariel's ministry, would prompt him to declare the peace process finished if they went ahead.
Washington expressed "deep concern" at the move, which threatened to add sharply to the 550,000 settlers already living in the occupied West Bank, including annexed Arab East Jerusalem.
Netanyahu made it clear the housing ministry's call for tenders for the homes threatened to detract from his efforts to convince world powers not to sign a deal with Iran over its nuclear programme that he considered inadequate.
"At this time, the attention of the international community must not be diverted from the main effort - preventing Iran from receiving an agreement that will allow it to continue its military nuclear programme," Netanyahu said, according to the statement.
Iran and the world powers it is negotiating with over its nuclear programme came close last weekend to agreeing a preliminary accord opening the way to a more comprehensive pact.
But differences prevented a breakthrough, and the two sides are scheduled to meet again in Geneva on November 20.
Netanyahu has furiously denounced the agreement being worked on as "dangerous", claiming it is entirely in Iran's favour and does nothing to halt a nuclear programme he and the world powers fear is aimed at developing atomic weapons.
He has said Israel will not shy from military action on Iran if necessary to prevent any nuclear threat directed at it.
US State Department spokeswoman Jennifer Psaki had said Washington was not only concerned by the initial announcement of the 20,000 settler homes, but also "surprised" and sought an explanation from Israel.
She repeated the longstanding US position on settlements - reaffirmed by US Secretary of State John Kerry last week - that "we do not accept the legitimacy of continued settlement activity".
Israel's newly reappointed foreign minister, Avigdor Lieberman, pledged on Tuesday to work to mend relations with the United States.
"Regarding our recent differences with the United States, it's now time to calm things down," Lieberman he said.
Several Israeli officials have claimed the settlement announcements have been in keeping with tacit "understandings" between the two sides linked to the release of 52 Palestinian prisoners since August.
But the Palestinians deny any such agreement exists.