UNITED NATIONS (Reuters) - The United Nations Security Council is due to vote on Thursday on a draft resolution that would demand that Israel "immediately and completely cease all settlement activities in the occupied Palestinian territory, including East Jerusalem."

Egypt circulated the draft on Wednesday evening and the 15-member council is due to vote at 3 p.m. (2000 GMT) on Thursday, diplomats said. It was unclear how the United States, which has traditionally protected Israel from U.N. action, would vote.

U.S. officials said this month that President Barack Obama was not expected to make major moves on Israeli-Palestinian peace before leaving office. In 2011, the United States vetoed a draft resolution condemning Israeli settlements after the Palestinians refused a compromise offer from Washington.

The draft text to be voted on Thursday says the establishment of settlements by Israel has "no legal validity and constitutes a flagrant violation under international law and a major obstacle to the achievement of the two-State solution and a just, lasting and comprehensive peace."

The Palestinians want an independent state in the West Bank, Gaza and East Jerusalem, areas Israel captured in a 1967 war. Most countries and the United Nations view Israeli West Bank settlements as illegal and an obstacle to peace.

The draft U.N. resolution "stresses that the cessation of all Israeli settlement activities is essential for salvaging the two-State solution."

The "Quartet" sponsoring the stalled Middle East peace process - the United States, Russia, the European Union and the United Nations - said in July that Israel should stop building settlements.