The United States vetoed a U.N. resolution that would have condemned Israeli settlements as "illegal" and called for an immediate halt to all settlement building.
The 14 other Security Council members voted in favor of the resolution in Friday's vote.
The U.S. opposes new Israeli settlements but says taking the issue to the UN will only complicate efforts to resume stalled negotiations between Israel and the Palestinians on a two-state solution.
Rice said the U.S. vote against the resolution should not be misunderstood as U.S. support for Israeli settlement activity.
"On the contrary, we reject in the strongest possible terms the legitimacy of continued settlement activity, For more than four decades, [Israeli settlement activity] has undermined security ...corroded hopes for peace and security ... it violates international commitments and threatens prospects for peace."
But, Rice said, "this resolution risks hardening the positions of both sides."
AIPAC expressed appreciation that the "Obama administration utilized its veto to prevent another one-sided, anti-Israel resolution from being enacted by the U.N. Security Council. The most effective action the administration can take to encourage peace is to use its influence to bring PA President Abbas back to the negotiating table—immediately and unconditionally".