The first institution of its kind in a Jewish colony, the College of Judea and Samaria will require some students to live at two "wildcat" outposts.
According to its website on Thursday, the illegal colonies of Nofei Nehemia and Rehelim - a few kilometres outside the northern West Bank settlement of Ariel - will provide cheap accommodation.
Nofei Nehemia offers three-room caravans to religious and married students at a cost of $147 per month while Rehelim provides singles, young couples and families caravans among its religious community for $80 per person per month.
The new university, about 20km inside the internationally recognised Palestinian border with Israel, has provoked a storm of protest from the Palestinian public.
A university spokesman told Aljazeera.net on Thursday that he would not comment on accommodation at unauthorised outposts because he did not accept that they were illegal.
However, Palestinian Prime Minister Ahmad Qurei described the university project on Tuesday - and the extension of Israel's security barrier in the West Bank - as "extremely dangerous moves". Several demonstrations have already taken place.
In a related incident, Israeli occupation forces in the West Bank suspended an army officer involved in the killing of two Palestinian teenagers during demonstration over the security barrier.
Aljazeera.net learned that Uday and Mufidh al-Asi were shot dead in Bait Laqia on Wednesday night after soldiers forced an end to a demonstration against a new section of Israel's illegal West Bank barrier. The teenagers were 14 and 15, respectively.
In a news release issued on Thursday, the military said a company commander was suspended "in light of errors - both in the way he conducted himself and in the way in which he led his force".
The Israeli statement added that the officer had been removed from active duty pending results of a full inquiry into the shooting incident.
Israeli border police officers guard
a wall that Palestinians resent
Witnesses told Aljazeera that six soldiers - who arrived in two army jeeps - first used rubber bullets and teargas before dispersing the crowd of 300 stone-throwing protesters with live fire.
"When the Palestinians still continued to attack, the commander fired at the legs of one of the rioters and then at the ground near the rioters," the army statement said, adding that a member of the Israeli unit was wounded lightly.
Many West Bank Palestinians are concerned about the expansion of Israel's security barrier, the majority of which is being built on confiscated Palestinian land.
Last week, Israeli occupation forces handed over its plan for a new wall to Attorney-General Menachem Mazus for a ruling on erecting a new wall in Hebron (al-Khalil). Nearly 400 Jewish colonists live with about 170,000 Palestinians in the West Bank town.
Israeli officials did not say what would happen to the 30,000 Palestinians who live in the Israeli-controlled area if the wall was built.
However, the officials admitted that the attorney-general might cancel the plan since the limitations it imposes on the Palestinians violate international law.
Hebron Mayor Mustafa Abd al-Nabi al-Natshi said that building a separation wall in the city would disfigure one of the world's most ancient towns and would be a crime against humanity. He added that the "Israeli army wants to decimate the lives of 170,000 Palestinians for the sake of 400 Jewish fanatics".
Israel is already building a barrier along the line between it and the West Bank. The International Court of Justice ruled that the wall - built on land Israel seized in the 1967 Middle East war - is illegal.