The two families entered the apartment block built in Matiyahu East, an expansion of the settlement, Modi’in Elite, on Tuesday, village residents say.
The building is one of 15, each with 32 apartments, erected on land belonging to the village of Bil’in, a few kilometres west of Ramallah.
In January, the Israeli supreme court ordered a temporary freeze on any building or settlement in the area, after an appeal presented evidence that construction had been carried out either with fake permits or none at all.
Mohammad Khatib, a Bil’in resident and campaigner against Israel’s so-called separation barrier, said settlers had been moving into the area for some time, although mostly at night "when we are not watching".
The first sign of the latest arrivals, he said, was the sight of two trucks bringing furniture to the settlement.
"We went and tried to stop them, telling them it was illegal and then sitting in the road," he said.
Khatib and other campaigners had "a long discussion" with the settlers, he said.
"They said they came here because it is less expensive and the property company tells them it is not Palestinian land and they present themselves as victims," Khatib said. "Maybe we can accept that."
Either way, he said, "it is the big contracting companies that are benefiting from this situation".
He said that there were about 30 occupants of the settlement at the time of the court injunction in January; now he believes there to be about 200.
Michael Sfard, a lawyer representing Bil'in villagers, said he called the police to area, who turned up only after he threatened to file a motion charging them with contempt of court.
Their arrival did not prevent the settlers from moving in.
A contempt of court motion will be filed to the Israeli high court unless the settlers are removed by Sunday, Sfard said.
"I wouldn’t bet on that happening," he said. "I have seen the way Israeli police behave when it comes to settlers."
Arik Ascherman, of the Israeli volunteer group Rabbis for Human Rights, said this latest case was not the first time that settlers have illegally taken residence of this new development.
"It is not unusual, it is just that we happened to be there to see it."
The latest arrivals, he said, "were not the scary, foaming-at-the-mouth, ideological settlers you see deep in the West Bank".
The village of Bil’in, just east of the Green Line, has been staging weekly, anti-wall demonstrations for around 15 months.
The campaign has been defined as a joint struggle of Palestinian, Israeli and international opposition to the separation barrier, which separates the village from around half of its land.
After an appeal by the Bil’in campaign, the supreme court is investigating whether the path of the wall through the village is valid.
Campaigners believe that the construction of new neighbourhoods to expand Modi’in settlement helped determine its route.