(Adds Netanyahu, Israeli ambassador, White House declining comment, background)
By Michelle Nichols
UNITED NATIONS, Dec 21 (Reuters) - The United Nations Security Council is due to vote on Thursday on a draft resolution that would demand that Israel "immediately and completely cease all settlement activities in the occupied Palestinian territory, including East Jerusalem."
Egypt circulated the draft on Wednesday evening and the 15-member council is due to vote at 3 p.m. (2000 GMT) on Thursday, diplomats said. They said it was unclear how the United States, which has protected Israel from U.N. action, would vote.
The White House declined to comment. Some council diplomats hope President Barack Obama, who has had a rocky relationship with Israeli Prime Minister Benjamin Netanyahu, may allow Security Council action by abstaining on the vote.
In a post on Twitter, Netanyahu said the United States "should veto the anti-Israel resolution at the U.N. Security Council on Thursday." The tweet gave no indication whether Israel had been informed of how Washington planned to vote.
A resolution needs nine votes in favor and no vetoes by the United States, France, Russia, Britain or China to be adopted.
U.N. diplomats see the resolution as a final chance for council action on the Middle East before Republican President-elect Donald Trump succeeds Democrat Obama on Jan. 20. Trump has signaled he would support Israel in a number of critical areas and not pressure it to engage in talks with the Palestinians.
Obama's administration has been highly critical of Israeli settlement construction in the occupied West Bank and East Jerusalem. U.S. officials said this month, however, that Obama was not expected to make major moves on Israeli-Palestinian peace before leaving office.
In 2011, the United States vetoed a draft resolution condemning Israeli settlements after the Palestinians refused a compromise offer from Washington. The United States says continued Israeli settlement activity lacks legitimacy.
The draft text to be voted on Thursday says the establishment of settlements by Israel has "no legal validity and constitutes a flagrant violation under international law."
It expresses grave concern that continuing settlement activities "are dangerously imperiling the viability of a two-state solution."
The Palestinians want an independent state in the West Bank, Gaza and East Jerusalem, areas Israel captured in a 1967 war. Most countries and the United Nations view Israeli West Bank settlements as illegal and an obstacle to peace.
Israel disputes that settlements are illegal and says their final status should be determined in any future talks on Palestinian statehood. The last round of U.S.-led peace talks between the Israelis and Palestinians collapsed in 2014.
Israeli U.N. Ambassador Danny Danon called the draft "the peak of hypocrisy" and said: "It is absurd that at a time when thousands are being massacred in Syria, the Security Council is devoting time and energy to convene and discuss condemning the only true democracy in the Middle East."
The draft said the council would "reiterate its demand that Israel immediately and completely cease all settlement activities in the occupied Palestinian territory, including East Jerusalem, and that it fully respect all of its legal obligations in this regard."
The "Quartet" sponsoring the stalled Middle East peace process - the United States, Russia, the European Union and the United Nations - said in July that Israel should stop building settlements.
The Quartet report said at least 570,000 Israelis were living in the settlements. (Additional reporting by Matt Spetalnick and Yeganeh Torbati in Washington; Editing by Sandra Maler and Peter Cooney)
Our Standards: The Thomson Reuters Trust Principles.