Prime Minister Benjamin Netanyahu's controversial decision allowing Israelis to construct homes in occupied West Bank threatens to isolate the Jewish state internationally.
Israel's government approved the first West Bank settlement in two decades on Thursday, weeks after legalising hundreds of homes forcibly built on private Palestinian land.
Prime Minister Benjamin Netanyahu has vowed to build a new settlement to compensate the residents of Amona, an illegal settler outpost that was demolished in February under the orders of Israel's Supreme Court.
The new settlement would be built near the existing settlement of Shilo, which is near the Amona site.
The government also approved tenders to build 2,000 new apartments from previously approved settlement projects.
The Palestinians claim the West Bank and east Jerusalem, areas captured by Israel in 1967, as parts of a future state.
Over 600,000 Israelis now live in settlements in the West Bank and east Jerusalem.
But Israel has not built a full-fledged new settlement since the 1990s. Instead, construction during that period has expanded existing settlements or taken place in unauthorised outposts like Amona.
Netanyahu's hard-line government, which is dominated by settler allies, recently passed legislation aimed at legalising dozens of those outposts.
Such settlements are deemed illegal by most of the world. Israel cites biblical, historical and political links to the land, as well as security interests, to defend its actions.
Palestinian official Hanan Ashrawi condemned the new settlement approval and called for international intervention.
"Today's announcement once again proves that Israel is more committed to appeasing its illegal settler population than to abiding by the requirements for stability and a just peace," she said.
"It is time that all members of the international community serve the cause of peace and justice and bring Israel to cease and desist its unlawful settlement activities and illegal unilateralism once and for all."