One of the biggest critics is an Israeli settlement monitoring group which says the move is totally illegal.
Peace Now says it proves Israeli Prime Minister Ariel Sharon lied to Washington earlier this year when he promised to remove dozens of small, isolated outposts under the peace plan.
"Sharon promised to take down the outposts and has lied to the Israeli public and to the Palestinian partners," said Yariv Oppenheimer, director of Peace Now.
All Israeli outposts in the Palestinian territories of the West Bank and Gaza are illegal, according to international law.
A senior adviser to Defence Minister, Shaul Mofaz, said the decision to grant permanent settlement status would allow the settlements to obtain grants for education and infrastructure projects such as lighting, as well as being eligible for protection by security forces.
"We need to give the minimum services to these people who are on the ground, especially for security and education," Ron Sheshne senior adviser to Mofaz on settlements told public radio.
The radio said that several of the outposts set to be accorded "legal" status had earlier been dismantled by the army.
In addition, the radio reported that parliament's finance commission would unlock $29 million worth of funds to build apartments in West Bank settlements.
Under the terms of the internationally drafted "road map", Sharon's government is obliged to freeze settlement activity in general and dismantle nearly 60 outposts in the West Bank which have been set up since he came to power in March 2001.
Since the "road map" was officially launched in June, the number of settlement outposts has remained largely unchanged.
"They are very committed to the peace process - on condition that they don't have to dismantle the outposts and end the occupation"
Settlement Watch Programme
About a dozen were dismantled by the army in a blaze of publicity, but new ones have since been set up by radical settler groups.
However, Dror Etkes, of the Israeli leftist group Peace Now's Settlement Watch programme, said that the move was a "blatant" breach of the terms of the "road map".
"According to the 'road map' they are expected to dismantle these outposts. Instead what we are seeing is that they are being integrated," he said.
"They (the Sharon government) are very committed to the peace process - on condition that they don't have to dismantle the outposts and end the occupation," he said.