Israeli government has proposed to build a wave of new settlements in memory of the three Israeli students that have been kidnapped and killed near Hebron, according to Israeli media.

Defence minister Moshe Ya'alon and PM Benjamin Netanyahu want to set up the outpost in the G'vaot area, which has been blocked since 2002, between Alon Shvut and Beitar Ilit.

Ya'alon presented the plan "aimed at strengthening the Israeli settlement enterprise" during Monday's cabinet meeting, Haaretz newspaper reported. The move is opposed by Justice Minister Tzipi Livni who said that the plan could harm Israel's international legitimacy - which is already damaged by the perpetual construction of illegal settlements.

"It is wrong to split the nation along ideological lines of construction that the entire nation is not behind," Livni said. "Such a move could also hurt our international legitimacy for a military operation against Hamas. Settlement construction at this stage would minimise the murders and transform it from a national issue to a political one."

Economy minister Naftali Bennett also expressed scepticism over the settlement proposal, forcing Netanyahu to postpone the vote to Tuesday night.

Settlements are illegal under international law and the European Union and its members do not recognise Israeli rule there. The Israeli cabinet is discussing which actions to take after the IDF discovered the corpses of 16-year-olds Naftali Frenkel, Gilad Shaar and 19-year-old Eyal Yifrach near the village of Halhul, north of Hebron, not far from where they disappeared on 12 June.

An IDF chief of staff suggested a strike on several Hamas facilities in the Gaza Strip, according to unnamed sources cited by Haaretz. During the meeting, Bennett suggested extreme actions such as a large-scale operation against Hamas in the West Bank and confiscating Hamas money in banks. His remarks were rejected by both Ya'alon and Livni as dangerous.

The three bodies were found around 6 pm in a shallow grave dug by their abductors in a valley between Beit Khalil and Halhul. According to, the boys were shot shortly after their kidnapping.

Israel has accused Hamas of abducting the teens, who disappeared while hitchhiking at night from the Jewish settlement of Gush Etzion.

Premier Netanyahu said: "Hamas is responsible and Hamas will pay." Hamas has denied any involvement.

Israel launched a wide-range operation in the West Bank to find them. More than 400 people, most said to be members of Hamas, were arrested and more than 1,300 sites were searched.

The massive manhunt exacerbated tension in the region and six Palestinians have been so far killed in clashes with Israeli forces.