Israel will build 5,000 new houses in the West Bank settlements and East Jerusalem following the release of 26 Palestinian prisoners, according to Haaretz newspaper.
Details for the construction of 1,500 houses in the East Jerusalem settlement of Ramat Shlomo already emerged after the release of the second of four batches of Palestinian inmates, as part of a deal for the resumption of peace talks.
But Ofir Akunis, member of Prime Minister Benjamin Netanyahu's Likud party, has confirmed that the government has Okayed the construction of 3,360 further units in the West Bank.
The government approved "the immediate construction of 860 new housing units in the main settlement blocs", Haaretz reported, citing the settlements of Ariel, Ma'ale Adumim, Givat Zeev and Beitar Illit.
The remaining units will be built in consecutive stages.
A senior Israeli official told AFP that those figures "are only in the planning stage".
The Palestinian Authority (PA) reacted with anger at the announcement of settlement building in East Jerusalem saying that it was "seriously studying" an official complaint against Israel before international courts.
"Israel is seeking to destroy the two-state solution and undermine any effort to ensure the success of the peace negotiations," the PA's foreign ministry said in a statement. "We call on the international community to take action and measures to put a decisive end to settlement and relate to it as a war crime."
The PA also rejected rumours that linked the settlement construction to the release of Palestinian prisoners.
"These attempts are lies and misleading," the statement charged. "Settlement construction has continued since 1967, with and without the release of prisoners."