* Move comes two days after U.N. envoy slams settlements
* New construction approved in three settlements
* Israeli-Palestinian peace talks collapsed in 2014 (Adds U.S. criticism, background, paragraphs 1-5)
By Jeffrey Heller and Arshad Mohammed
JERUSALEM/WASHINGTON, Aug 31 (Reuters) - Israel approved on Wednesday 284 new housing units in Jewish settlements in the occupied West Bank, drawing a U.S. accusation that its policies could expand settlements in a "potentially unlimited way."
U.S. officials said the criticism from the U.S. State Department marked the first time it has suggested in public that Israel may be moving toward unlimited settlement expansion on land the Palestinians seek to establish their own state.
The U.S. officials, who spoke on condition of anonymity, said the latest language was unusually strong but reflected a change in tone rather than any major shift in U.S. policy.
U.S.-backed Israeli-Palestinian peace talks collapsed in 2014 and there are no signs that they will resume any time soon.
A planning committee of Israel's military-run Civil Administration in the West Bank gave approved the construction of a 234-unit nursing home in Elkana, 30 houses in Beit Arye and 20 dwellings in Givat Zeev, according to Peace Now, an Israeli group that monitors and opposes settlement-building.
In addition, 179 building permits were issued retroactively, legalising under Israeli law housing units that were erected in the settlement of Ofarim, Peace Now said.
"We are deeply concerned by the government's announcement to advance plans for these settlement units in the West Bank," U.S. State Department spokesman John Kirby said at a news briefing in Washington.
"We are particularly troubled by the policy of retroactively approving unauthorized settlement units and outposts that are themselves illegal under Israeli law. These policies have effectively given the Israeli government a green light for the pervasive advancement of settlement activity in a new and potentially unlimited way."
The Civil Administration decision came two days after a senior U.N. envoy said in a statement to the U.N. Security Council that a surge in such building, which most countries view as illegal, presented an obstacle to peace with the Palestinians.
Israel, which captured the West Bank in a 1967 war, rejected the criticism by Nickolay Mladenov, the U.N.'s special coordinator for the Middle East peace process. It said Jews had lived in Judea, the biblical term for the West Bank, for thousands of years.
Responding to Mladenov's comments, Palestinian Prime Minister Rami Hamdallah called on the international community to put pressure on Israel to stop settlement activity.
Last week, left-wing Israeli daily Haaretz reported that Israel plans to expand the Jewish settlement in the West Bank city of Hebron for the time in more than a decade.
Some 1,000 settlers, protected by Israeli troops, live among 230,000 Palestinians in Hebron and the area is a frequent flashpoint of violence.
A report issued in July by the Middle East peace "Quartet" - the United States, United Nations, European Union and Russia - called on Israel to "cease the policy of settlement construction and expansion". It said at least 570,000 Israelis live in settlements.
The State Department said since the report's release there has been a "significant acceleration" of settlement activity, with Israel promoting plans for over 2,500 units, including over 700 units retroactively approved in the West Bank.
(Reporting by Jeffrey Heller in Jerusalem and Arshad Mohammed in Washington; Editing by Mark Heinrich and James Dalgleish)
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