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 2000 GMT on Thursday, diplomats said.
It is unclear how the United States, which has traditionally protected Israel from UN action, would vote but it vetoed a similar resolution in 2011.
The draft resolution 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 UN resolution "stresses that the cessation of all Israeli settlement activities is essential for salvaging the two-State solution."
Israeli Prime Minister Benjamin Netanyahu has urged the United States to veto the proposed resolution.
The US should veto the anti-Israel resolution at the UN Security Council on Thursday.
— Benjamin Netanyahu (@netanyahu) December 22, 2016
Israel last month revived plans to build 500 new homes for Jewish settlers in Israeli-annexed east Jerusalem, after Donald Trump won the US presidential election.