Ariel Sharon has brushed aside an appeal by the White House to stop an unprecedented move by Jewish settlers into a Palestinian district of Jersualem which his critics say will further hinder a political settlement.
After more than two years of legal and political wrangling, Mr Sharon's office approved the plan last week and the first Jewish families have moved into new flats in the Ma'aleh Ha'zeitim settlement, beside the densely populated Arab district of Ras al-Amoud.
It is the first time a Jewish settlement has been built in a Palestinian area of Jerusalem since Israel seized control of the entire city in 1967.
The first settlers at the apartment complex, just a few hundred metres from the Wailing Wall, include a millionaire, Irving Moskowitz, and his son-in-law Ariel King, a far-right political activist.
More than 100 more families are expected to move in during the coming months.
Condoleezza Rice, the White House national security adviser, telephoned Mr Sharon's office and warned that letting Jews move into the settlement might raise tension during the war on Iraq and further undermine the prospect of a political settlement.
Danny Seidemann, an adviser to previous Israeli leaders on how to divide Jerusalem, said Mr Sharon's approval for the settlers' move into Ma'aleh Ha'zeitim was a test for George Bush and Tony Blair, who meet in Belfast today to discuss, among other things, the "road map" to a Middle East peace deal which envisages a Palestinian state within three years.
"This is not something Sharon turned a blind eye to. This is something he gave the go ahead for even after Condoleezza Rice asked him not to," he said.