The housing ministry published advertisements in the press on Monday inviting the bids, with 348 houses to be constructed in Maale Adumim, east of Jerusalem, and 342 houses to be built in Beitar Eilit to the south of the Holy City.
The number of Israelis living in the occupied West Bank, excluding annexed east Jerusalem, has increased by 2.7% to 260,042 during the past six months, according to statistics published by the interior ministry last week.
Plans of Ehud Olmert, the Israeli prime minister, to withdraw from parts of the West Bank and uproot tens of thousands of settlers while in effect annexing the largest settlement blocs, have been awaiting decision since Israel's war in Lebanon.
Home to 28,000 people, Maale Adumim is the largest Jewish settlement in the occupied West Bank and one of the most controversial, lying about a dozen kilometres away from east Jerusalem.
Although Israel has frozen a controversial project to link Maale Adumim to east Jerusalem following sharp US criticism, Olmert has said Maale Adumim will remain part of Israel.
George Bush, the US president, has repeatedly urged Israel to halt settlement activity in keeping with the internationally drafted roadmap peace plan, which has made no substantial progress since its launch in 2003.
The Palestinians say any building on the so-called E-1 corridor between Maale Adumim and Jerusalem will wreck the viability of their promised future state by cutting off the rest of the West Bank from east Jerusalem.