(Adds Libyan ambassador, Israel spokesman; paragraphs 8-11)

By Louis Charbonneau

UNITED NATIONS, March 10 (Reuters) - U.N. Secretary-General Ban Ki-moon on Monday urged Israel to halt plans to build hundreds of new homes in a Jewish settlement in the occupied West Bank, Ban's spokeswoman said.

"The secretary-general calls on the government of Israel to halt settlement expansion and reiterates that the fulfillment of 'road map' obligations by both parties is an important measure underpinning the political process between them," Ban's spokeswoman, Michel Montas, said in a statement.

The expansion, which the Palestinians denounced as another blow to U.S.-brokered peace talks, was announced on Sunday, just three days after a Palestinian gunman killed eight students at a Jewish seminary in Jerusalem that was associated with the settler movement.

"Any settlement expansion is contrary to Israel's obligations under the road map and to international law," Montas said.

The U.S.-mediated peace talks, launched in November with the goal of reaching a statehood agreement before U.S. President George W. Bush leaves office in January, have been stalled by disputes over Jewish settlement building and a deadly Israeli offensive in the Hamas-controlled Gaza Strip.

The Middle East "road map" for peace, first outlined in 2002, calls on Israel to halt all settlement activity and on the Palestinians to rein in militants.

The guardian of the road map is the so-called Middle East quartet consisting of the United States, the European Union, Russia, and the United Nations.

Israeli Prime Minister Ehud Olmert's spokesman, Mark Regev, said on Sunday that the decision to authorize the construction was made before Thursday's attack and that it was consistent with the country's policy of building within large settlement blocs.

Separately, Libyan Ambassador Giadalla Ettalhi told reporters he was continuing to work on a draft resolution Libya circulated earlier this month condemning Israel's military actions in the Gaza Strip but without mentioning the rockets that were being fired on daily basis from Gaza into Israel.

Western diplomats said the draft Security Council resolution was unacceptable at the time and would have to be revised to condemn the rocket attacks to be acceptable to the United States and European council members.

Ettalhi said he was keeping a close eye on the reduction of violence in Gaza, which he said could have an impact on Libya's plans for the resolution. (Reporting by Louis Charbonneau; Editing by Bill Trott)

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