Israeli Prime Minister Benjamin Netanyahu will approve building new settler homes despite US pressure for a building freeze on land Israel occupied during the 1967 war.
US President Barack Obama's administration has been pressuring Israel to put a halt to settlement construction, a major obstacle in stalled Israeli-Palestinian peace talks, so it can announce a resumption of the negotiations later this month.
Mr Netanyahu also is under pressure from many lawmakers in his rightist Likud party members to resist any freeze on settlement building in the occupied West Bank, land Palestinians want as part of a future state.
Palestinians have reacted with anger to the latest development.
Nabil Abu Rdainah, an aide to Palestinian President Mahmoud Abbas, said that peace talks, suspended since December, could not resume without an Israeli pledge to a total freeze of settlement building.
"The Palestinian ... and American position, calls for ... a settlement freeze, including 'natural growth.' A partial settlement freeze is not enough and there must be a commitment to the obligations of the peace process as stated by President Obama," Abu Rdainah told Reuters.
The Netanyahu aide, who declined to be identified by name, said that after the several hundred housing units are authorised, the Israeli leader would be prepared to consider a moratorium on building, lasting a few months.
Israel is already building some 2,500 housing units at West Bank settlements that are in various stages of construction.
Palestinian officials say they will resume talks only if Israel stops all building within Jewish enclaves in the West Bank, in keeping with a 2003 US-backed "road map" peace plan that also called on the Palestinians to rein in attacks on Israelis.
Mr Obama has taken the public stance that Israel must halt all settlement activity under the "road map".
Palestinians say settlements, built on land Israel occupied in a 1967 war, could deny them a viable state.
The United States is seeking to bridge the Israeli and Palestinian positions and persuade Arab states to take steps towards normalising relations with the Jewish state.
Obama's special Middle East envoy, George Mitchell this week met Netanyahu aides in New York to work to achieve an agreement to resume talks in time for an announcement at the UN General Assembly towards the end of September.
On Wednesday, Israel and the Palestinians held their highest-level talks since Netanyahu's government was inaugurated in March when Israeli Vice Prime Minister Silvan Shalom met Palestinian Economy Minister Bassem Khoury in Jerusalem to discuss economic issues.
A settlement deal would end the most serious rift in US-Israeli relations in a decade but Netanyahu has so far resisted a complete construction moratorium, saying settlers were entitled to lead what he termed "normal lives".
Reuters