Israel's official approval of the construction of more than 450 new homes in the occupied West Bank has angered Palestinians.
This is the first new government-approved construction project in the West Bank since Prime Minister Benjamin Netanyahu came to power in March, the BBC reports.
Senior Palestinian negotiator Saeb Erekat said the move "nullified" the effect of any future building freeze.
Palestinians have ruled out resumption of peace talks with Israel until there is a complete halt to settlement construction, and Mr Erekat said Israel's decision further undermined its credibility as a partner for peace.
The United States has put pressure on Israel to halt settlement building.