JERUSALEM - Israeli Prime Minister Ehud Olmert yesterday rejected overtures by Hamas, the militant Islamic group that rules Gaza, for discussions about a temporary cease-fire.

At the same time, Olmert's government raised the ire of Palestinian representatives from the West Bank, with whom Israel is embarking on negotiations for a permanent peace, by seeking budget approval to build more housing for Jewish residents in areas that the Palestinians claim for their future state.

Israeli officials said that a Housing and Construction Ministry budget proposal for 2008 included plans to build 500 apartments in Har Homa, a Jewish development in a hotly disputed part of East Jerusalem, and 240 apartments in Maale Adumim, the largest Jewish settlement in the Israeli-occupied West Bank with a population of more than 30,000.

Israeli officials tried to play down the significance of the request.

In any event, the action is likely to cast a pall over a meeting of the Israeli and Palestinian negotiating teams set for today, the second since last month's American-sponsored peace conference in Annapolis, Md.

The chief of the Palestinian negotiating team, Ahmed Qurei, issued a statement saying that the Annapolis meeting and the ensuing negotiations toward an accord would have "no meaning" if Israel continued its settlement activities.

Referring to the Gaza issue, Olmert said at the start of the weekly Cabinet meeting that "counterterrorist operations will continue as they have for months," in response to the continued rocket fire directed at Israel from the Gaza Strip.

At least five rockets were launched from Gaza yesterday, an Israeli army spokesman said. Two caused damage but no casualties.

Ismail Haniya, leader of the Hamas government in Gaza, had expressed a willingness, in a telephone call to an Israeli television reporter last week, to enter into talks with Israel for a mutual cease-fire. But Olmert said that Israel had "no interest in negotiating with elements" who did not fulfill the internationally approved conditions of recognizing Israel and renouncing violence. *