Powell expressed his disappointment to Israeli Foreign Minister Silvan Shalom during a meeting on Wednesday.
"The minister gave me assurances they are hard at work on that," Powell said after the talks at the State Department.
"We will be exchanging more information on that subject."
Israeli Prime Minister Ariel Sharon agreed to tear down the numerous illegal outposts erected since he came to power in 2001.
The policy change was necessary after the PM endorsed the US-backed road map peace plan last year, obliging Tel Aviv to also halt all expansion of existing illegal settlements.
Outposts are generally set up as makeshift settlements with caravans but are often later "legalised" by local occupation authorities.
But Shalom insisted the task was well in hand, insisting that dozens had already been dismantled and that "there are 28 left".
"We have given all the list [of remaining outposts] to the American administration and we are working together to implement our commitments in the near future," he said.
Shalom also defended Israel's construction of its separation barrier in the West Bank, saying it had led to the dismantlement of 80 roadblocks within the territories.
But the International Court of Justice (ICJ), which is deliberating on the barrier's legality, may not share the foreign minister's view when it rules on the legality of the barrier on Friday.
The ICJ's ruling is non-binding, but the Israeli government is preparing itself for defeat at the court in The Hague, the highest UN legal body.
Shalom urged the international community "not to give the Palestinians the opportunity to try to arrange a big party next week in the United Nations" following the ICJ verdict.