UN Secretary-general Ban Ki-moon on Wednesday called Israel's plans for 20 new housing units in East Jerusalem "illegal" and urged Israelis and Palestinians to refrain from any actions that could derail proximity talks.?

UN Secretary-General Ban Ki-moon speaks to the media after briefing his recent visit to the Middle East during a Security Council meeting at the UN headquarters in New York, the United States, March 24, 2010. Ban Ki-moon on Wednesday called on Israelis and Palestinians to start negotiations immediately and to take measures to avoid disruptions by extremists. [Shen Hong/Xinhua]

The new housing units are in "the heart of Arab neighborhood," said Ban, who previously criticized the construction of 1,600 new settlements in East Jerusalem.

"Any unilateral actions which will undermine or prejudice the final outcome of these negotiations will have to be refrained," he told reporters after a closed-door session with the UN Security Council.

Israelis and Palestinians agreed to launch proximity talks brokered by Washington in early March, but the peace process quickly tumbled after Israel approved a proposal to construct the new housing units in East Jerusalem.

Ban acknowledged that simply getting both parties to enter the proximity talks has been "quite difficult."

The secretary-general said he is headed to Sirte, Libya on Thursday to attend the Summit of the League of Arab States to drum up support for the proximity talks, which should eventually lead to direct negotiations.

UN Secretary-General Ban Ki-moon briefs his recent visit to the Middle East during a Security Council meeting at the UN headquarters in New York, the United States, March 24, 2010. [Shen Hong/Xinhua]

"I know the Arab countries are frustrated and they have expressed their concerns and reluctance in supporting these proximity talks," he said. "I have been engaging in bilateral talks with many Arab leaders advising and appealing to them to support this dialogue process."

Within two years, Israel and Palestine should resolve all final status issues, said Ban, who just returned from a visit in the Middle East after the Quartet meeting in Moscow last Friday.

As time is short, said Ban, the proximity talks should be held without preconditions and both parties should be ready to discuss "all the core substantive issues."

"I can only encourage the parties involved to engage in dialogue with sincerity, a sense of flexibility and political will, " he said.