Israeli government figures showed on Tuesday work began on about 1850 new settler homes in the West Bank and Gaza Strip in 2003.
Figures also revealed settler home-building in 2003 far outstripped Israel's overall rate, which fell 8%.
But Israel said it had the right to build in settlements to accommodate "natural growth".
"The settlements ... are dynamic communities with a much larger growth in population than elsewhere," said Tourism Minister Benny Elon.
"Therefore it is natural construction and will also grow and grow."
However, Hasan Abu Libdah, spokesman for Palestinian Prime Minister Ahmad Quraya, said settlement expansion showed Israel's lack of commitment to the US-backed "road map".
He added it was proof of "US bias (in favour of) this Israeli government".
Meanwhile, US State Department spokesman Richard Boucher reiterated Washington's position there needed to be an end to settlement activity as prescribed by the "road map".
to President Bush to dismantle all the unauthorised settlement outposts and to take further steps toward an end to settlement activity," he said.
Sharon is the architect of Israel's
"We do expect the Israeli government to keep its commitment
The United States last year signalled its displeasure with Israeli settlement building, as well as the route of its West Bank barrier, by deducting nearly $290 million from a $9 billion package of loan guarantees to Israel.
The settlement expansion trend could also complicate Prime Minister Ariel Sharon's attempt for US approval for his unilateral "disengagement" plan.
The right-wing prime minister's initiative calls for uprooting settlements in Gaza, plus removing several more in the West Bank and then drawing a "security line" that would leave Palestinians with less land than they seek for a state.
There were signs from Washington on Monday, after a round of US-Israeli talks, the White House was moving towards agreeing to Sharon's controversial plan.
There are nearly half a million Jewish settlers living on illegally occupied land in Jerusalem, the West Bank and Gaza.
Israel captured the lands in the 1967 Middle East war.