Israeli newspaper Yedioth Ahronoth said on Monday Prime Minister Ariel Sharon had ordered the construction of two neighbourhoods between Maale Adumim and occupied Arab East Jerusalem last week under proposals to cement Israel's hold on Jerusalem.
Israel radio also reported late on Sunday that Defence Minister Shaul Mofaz had approved the construction of the new Israeli settlements in the West Bank.
The radio said some of the units would be built between the settlement and Jerusalem, 5km away.
No immediate comment was available from Israeli or Palestinian officials on the report.
Maale Adumim, with nearly 30,000 residents, is the largest Jewish settlement in the occupied West Bank.
Violation to road map
Palestinians have long contended that Israel plans to annex a chunk of West Bank territory by linking the settlement to Jerusalem.
Palestinians want East Jerusalem as the capital of a future state and have demanded that Israel abide by its commitment under a US-backed peace road map to freeze all settlement construction.
Expansion of Israeli settlements runs counter to the road map peace plan, which calls for a complete freeze on settlement construction, including that resulting from natural population growth.