"We will resort to the United Nations. We will ask the U.N. Security Council to discuss this and take the needed measures," he said.
Over Israel's objections, the Palestinians last September won upgraded observer status at the United Nations. Since then, they have repeatedly threatened to use their upgraded status to seek admission to additional U.N. bodies, such as the International Criminal Court, and push for international legal action against Israel.
Kerry is scheduled to arrive early next week in hopes of finding a formula to relaunch the first substantive peace talks since late 2008. The U.S. has repeatedly criticized both Israeli settlement activity as well as Palestinian threats to pursue international legal action against Israel as being unhelpful.
Jewish settlers began building outposts in the 1990s to sidestep an Israeli commitment to stop building new settlements. Today there are dozens of unauthorized outposts, in addition to about 120 full-fledged settlements across the West Bank.
Critics say the government has been quietly complicit in building the outposts, linking many of them to the Israeli electric grid and building roads for them.
A decade ago, Israel pledged to take down about two dozen unauthorized outposts, but it has done little to carry out its promise.
In Washington, State Department spokeswoman Jen Psaki said the U.S. won't "accept the legitimacy of continued Israeli settlement activity."
"Continued settlement activity is counterproductive to the cause of peace," she told reporters. "An independent Palestine must be viable, with real borders that have to be drawn."
Psaki said it was important that both sides now take action to build trust and confidence.
"This is difficult," Psaki said. "And we're not underestimating that, the challenge of moving this path forward, but we've seen from both sides an openness to continuing the discussion."