A spokesman for Israel's housing ministry said on Sunday that by the end of the year the ministry would put out to tender contracts to build 300 homes in the settlement of Maale Adumim and 400 homes in Beitar Eilit.
"Housing Minister Yitzhak Herzog has approved the construction because there is a consensus in Israel to hold on to these two settlements in the future," said spokesman Kobi Bleich.
Both sprawling settlements are located around annexed east Jerusalem, which the Palestinians hope to make the capital of their promised state.
Israel considers the whole of Jerusalem the undivided capital of the country.
The announcement came during a visit to the region by US Secretary of State Condoleezza Rice, who has criticised Israeli moves to expand settlements in the West Bank despite its prospective pullout from the Gaza Strip this summer.
Herzog belongs to the centre-left Labour party, which joined the government primarily to shore up this summer's Gaza pullout.
His spokeswoman quickly sought to minimise any direct responsibility for the prospective settlement enlargements.
"Minister Yitzhak Herzog has approved the construction because there is a consensus in Israel to hold on to these two settlements in the future"
Israel Housing Ministry spokesman
"The construction plans date back a long time, well before the minister took office, and in the six months he has been on the job, he has not signed a single tender," Pina Ben Ami said.
But the Palestinian cabinet minister responsible for Jerusalem accused Israel of brazenly ignoring US criticism over settlement expansion to raze Palestinian homes in the city.
"These new construction plans come in defiance of statements from President Bush and Condoleezza Rice," Hind Khuri said.
Khuri said the projects worked for the "systematic destruction of Palestinian homes in east Jerusalem", on the pretext of being built without permits.
"The aim is to create new fait accomplis to change the face of Jerusalem," she added.
Flying on Saturday to Israel and the West Bank at the start of her Middle East tour, Rice had tough words for Israeli plans to expand Jewish settlements east of Jerusalem that have drawn vocal protests from the Palestinians.
Nearly 500,000 Jewish settlers
live on occupied Arab land
"We don't intend that the Israelis try to create facts on the ground," she said. "They simply cannot engage in activities that are supposed to somehow prejudge a final status outcome."
She reiterated the US view that final negotiations on a Palestinian state, as provided in the road map, would have to take into account "certain realities" since the 1967 Arab-Israeli war.
Arab East Jerusalem
But she stressed that any changes would have to be mutually agreed.
A residential suburb of occupied and annexed east Jerusalem, Maale Adumim is the most populous Jewish settlement in the West Bank with 28,000 settlers.
The 25,000-strong Beitar Eilit is a Jewish Orthodox community a stone's throw from the Israeli border and part of the Gush Etzion settlement bloc.
"These new construction plans come in defiance of statements from President Bush and Condoleezza Rice... The aim is to create new fait accomplis to change the face of Jerusalem"
Palestinian cabinet minister
It emerged earlier this year that Defence Minister Shaul Mofaz has approved the construction of more than 3500 new homes in Maale Adumim.
The Israeli authorities are preparing to revive plans to link Maale Adumim to Jewish settlements in Arab East Jerusalem as the government presses ahead with plans to evacuate all Israeli settlers and troops from Gaza by October.