France, Germany, Italy, Spain and Britain urged Israel on Thursday to halt settlement-building in the West Bank.
The joint statement came as tensions simmered around East Jerusalem, another territory Palestinians seek for a future state, where Jewish settlers backed by an Israeli court have taken over some homes in the neighbourhood of Sheikh Jarrah.
"We urge the government of Israel to reverse its decision to advance the construction of 540 settlement units in the Har Homa E area of the occupied West Bank, and to cease its policy of settlement expansion across the Occupied Palestinian Territories," the European nations said in a joint statement.
"If implemented, the decision to advance settlements in Har Homa, between East Jerusalem and Bethlehem, will cause further damage to the prospects for a viable Palestinian State, with Jerusalem as the capital of both Israel and a Palestinian State," they said.
In Sheikh Jarrah, Israeli police said they had arrested nine people for disorderly conduct or assault as settlers faced off with Palestinian protestors in what have become nightly clashes.
A Reuters reporter saw a car ablaze near a home taken over by settlers. It was not immediately clear who torched the car.
Israel's Supreme Court is due to hear challenges next week to the evictions of Palestinians ordered by a lower court that found in favour of settlers' claims. Human rights groups say the ruling, if upheld, could set a precedent for dozens more homes.
A far-right Israeli lawmaker, Itamar Ben-Gvir, said he was setting up an office in the neighbourhood - known to some Jews as "Simon the Just," after an ancient high priest buried there.
"I am happy that, since we arrived, police have started getting to work," Ben-Gvir tweeted. "But if police don’t deal with the terrorists with a strong hand, we will be here until there is quiet."
Israel captured East Jerusalem, the West Bank and the Gaza Strip in a 1967 war. It deems all of Jerusalem its capital, a status that has not won international support.