UNITED NATIONS, Oct 14 (Louis Charbonneau/Reuters) - U.N. Secretary-General Ban Ki-moon criticized Israel on Friday over reports that it plans to build 2,600 more housing units in East Jerusalem, saying further settlement activity was unacceptable.

The Secretary-General is deeply concerned at continued efforts to advance planning for new Israeli settlements in occupied East Jerusalem, Ban's press office said in a statement.

Recent developments in this regard have been unacceptable, particularly as efforts are ongoing to resume (Israeli-Palestinian) negotiations, and run contrary to the Quartet's call on the parties to refrain from provocations, it said.

The Peace Now anti-settlement group said on Friday that Israel planned to build the housing units in a new urban settlement in East Jerusalem, angering Palestinians who want a halt to all such projects before they return to peace talks.

The Quartet of Middle East peace negotiators -- the United States, Russia, the European Union and United Nations -- has urged Israel and the Palestinians to avoid provocative actions and urged them to resume stalled peace negotiations.

The Peace Now group said the settlement plan was approved earlier this week by an Israeli municipal committee, which had given the go-ahead for construction on the site that lies on land seized by Israel in the 1967 Middle East war.

There was no immediate comment from the municipal committee on the report, but the Palestinians said they believed the news was accurate.

The Secretary-General reiterates that settlement activity in East Jerusalem and the remainder of the West Bank is contrary to international law, the U.N. statement said, adding such activity must cease.

The reports about a new settlement plan come as the Palestinians attempt to secure U.N. recognition of a sovereign Palestinian state in the West Bank and Gaza Strip, with East Jerusalem as its capital, along with full membership in the United Nations.

The Palestinian U.N. bid has infuriated Israel, which says it is an attempt to delegitimize it. Israel's ally the United States has said it was prepared to veto the Palestinian U.N. application, which is currently being assessed by a U.N. Security Council committee.

If the Palestinian application to join the United Nations comes to a vote in the full Security Council, the United States has the power to veto it due to its status as a permanent member of the 15-nation panel.

The Security Council committee is expected to report back to the full council next week about progress it has made assessing the Palestinian U.N. application.

Diplomats on the committee, which includes all council members, say privately that little progress has been made in assessing the Palestinian request to join the world body. (Editing by Peter Cooney)