Israeli-U.S. relations have hit a 35-year low over a West Bank settlement plan that threatens to derail peacemaking efforts with the Palestinians, Israel's envoy to Washington was quoted as saying on Monday.

The comments attributed to Ambassador Michael Oren, a noted Middle East historian, clashed with Prime Minister Benjamin Netanyahu's assurances that the row resulting from a settlement announcement deemed insulting by the Obama administration was under control.

Israel's ties with the United States are in their worst crisis since 1975 ... a crisis of historic proportions, the Yedioth Ahronoth newspaper quoted Oren as telling other Israeli diplomats in a telephone briefing over the weekend.

The remarks, also carried by other Israeli media, appeared to refer to U.S. pressure in 1975 for an Israeli redeployment in the Egyptian Sinai, occupied by Israel since the 1967 war and the site of renewed fighting in 1973.

Israel's Foreign Ministry had no immediate comment.

An Israeli plan to build 1,600 more homes for Jews in West Bank land annexed to Jerusalem was announced during a visit by U.S. Vice President Joe Biden aimed at ushering in indirect peace negotiations with the Palestinians.

In unusually blunt language, U.S. Secretary of State Hillary Clinton called Israel's behavior insulting. In a CNN interview on Friday, she said bilateral ties were not at risk. I mean, our relationship is durable and strong.

Netanyahu, who has vowed to continue building in and around Jerusalem while reining in construction of Jewish settlements on other occupied land where Palestinians seek a state, voiced regret for what he described as bureaucratic happenstance.

We know how to deal with these situations -- with equanimity, responsibly and seriously, he said on Sunday.

A U.S. envoy is due back in the region later in the week to try to get peace talks, suspended since December 2008, under way. Palestinian President Mahmoud Abbas had resisted restarting negotiations without a total Israeli settlement freeze.

(Writing by Dan Williams; editing by Tim Pearce)

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