What is the Israeli settlement bill about?
The bill seeks to legalise the status of about 100 outposts, a cluster of trailers and prefabricated houses, where ultra-nationalist Israeli families live.
These outposts were built in the West Bank, when the land was illegally occupied by Israeli forces in the 1967 Middle East war.
But the question about the legality of the outposts has always been a controversy – even in Israel.
Under international law, Israeli communities built on occupied ground violate The Hague Regulations of 1907.
Unlike large settlements that Tel Aviv defends vigorously, the outposts are considered illegal by Israeli courts because they have been built on private Palestinian property.
The bill was brought to parliament last month by the Jewish Home party, a coalition partner of Israeli Prime Minister Benjamin Netanyahu. It passed the first parliamentary hearing on Monday.
It followed a judgement by Israel's Supreme Court that ordered the authorities to demolish Amona, one of the illegal outposts in the West Bank.
What does the bill mean for the future of Palestinians?
If the parliament votes the bill into a law, it will give legal cover to the outposts and cement Jewish settlers' claim over the land.
Palestinian leaders want the West Bank, along with the Gaza strip, to form part of a future state. And this fact has not been lost on far-right Israeli leaders.
"Today, the Israeli Knesset [parliament] shifted from a path to establish a Palestinian state, to a path of extending sovereignty to Judea and Samira," commented Naftali Bennett, head of the Jewish Home party, according to the Times of Israel.
Judea and Samira are Israeli terms for the West Bank.
The United Nations does not recognise the settlements and outposts as legitimate.
Even the US, Israel's strongest ally, has expressed concern over the bill.
What are the chances it will actually become a law?
Under Israel's parliamentary rules, a bill has to go through three readings before it becomes law.
But even the preliminary hearing of the so-called Regulation Bill is significant.
Netanyahu himself was critical of the bill, that Israel's Attorney-General Avichai Mandelblit has warned would be struck down by the court.
But Netanyahu gave in to the pressure of his own right-wing Likud party lawmakers and other hardline parliamentarians who have helped him form the government.
The fact that the Likud party reached a compromise with coalition partners to remove the specific mention of the Amona outpost in the bill goes to show the urgency of its adoption.
This has been done to circumvent the Supreme Court order that calls for demolishing Amona by December 25. Now government plans to move settlers to an adjacent piece of land.
What could be the international reaction?
The US, the EU and many other countries have frequently warned Israel against new settlement buildings in the occupied territory.
The US State Department last month said the bill would be a retreat from longstanding Israeli policy of not building anything on private Palestinian property.