"I was deeply concerned to hear the latest announcement by the Israeli authorities to advance settlement plans once more," Catherine Ashton said in a statement.
She added the settlements were "illegal under international law, constitute an obstacle to peace and threaten to make the two-state solution impossible".
She reiterated her call on Israel to cease its settlement building and said current efforts at peace talks were a "unique opportunity" for both sides.
On Friday, Tel Aviv unveiled proposals for 1,076 units in annexed east Jerusalem and 801 in the occupied West Bank in a move the Palestinians said was aimed at forcing the United States to abandon its push towards Middle East peace.