Israel has invited bids to build nearly 1,200 new homes for Jewish settlers in the occupied West Bank and annexed east Jerusalem.
Uri Aiel, Israel's housing minister and a member of the ultranationalist Jewish Home party, made the announcement on Sunday. The Israeli cabinet later said 26 Palestinian prisoners would be released over the next few days, ahead of peace talks with Palestinian leaders.
However Mohammed Shtayeh, a Palestinian negotiator, said that the new settlement plans showed Israel was "not serious" in its efforts to negotiate peace.
He said that Israel aimed "through this condensed settlement activity to destroy the basis of the solution called for by the international community, which aims to establish a Palestinian state on the 1967 borders."
Plans 'disclosed to US'
Israel has made a major push on settlement building since July 30.
Israeli media suggested in unconfirmed reports that the new housing plans were disclosed to the US in advance and had been aimed partly at overcoming opposition within the pro-settlement cabinet to the prisoner releases.
"I saw that important newspapers reported this morning that there is purportedly some kind of co-ordination regarding the construction," Ariel said on Army Radio.
"I very much believe the newspapers and the media but I don't know whether I can authenticate this."
Continuing settlement activity means dictations not negotiations.
Israel's Housing Ministry said on its website that tenders were issued for 793 new apartments in areas of the West Bank that Israel annexed after capturing the territory and the eastern part of Jerusalem in the 1967 war.
Plots for 394 more units were being sold in the West Bank settlements of Ariel, Efrat, Maale Adumim and Betar, it said.
While condemning settlement expansion, Palestinians have stopped short of threatening outright to abandon the peace negotiations, which are due to go into a second round on Wednesday in Jerusalem after a session in Washington.
Saeb Erekat, the Palestinian chief negotiator, told Reuters news agency that the international community must stand with the peace, "shoulder to shoulder with us and hold Israel accountable for its continuing settlement activities".
"Continuing settlement activity means dictations not negotiations," he said.
Israel was expected to free a first group of 26 Palestinian prisoners on Tuesday out of a total of 104 Arab inmates whose release was approved last month to help restart the talks.
A statement from Prime Minister Netanyahu's office said the list of prisoners would be published on a prisoner service website late on Sunday after notice has been given to "bereaved families that asked to be informed in advance".
"The prisoner release will be carried out at least 48 hours after the list will have been published. It was emphasised in the aforesaid discussion [by a ministerial committee] that if any of the released prisoners return to hostile activity against the State of Israel, they will be returned to continue serving their sentences," that statement said.
The list includes 14 prisoners who will be transferred to Gaza and 12 from the West Bank. Eight prisoners on the list were due to be released in the next three years and two in the next six months.
Mahmoud Abbas, the Palestinian President, had called for the release of prisoners held since before a 1993 interim peace accord took effect.
Israel has jailed thousands more Palestinians since then.
Separately, Israel's military-run Civil Administration in the West Bank gave preliminary approval on Thursday for the construction of more than 800 new homes for settlers, but said it needed government approval before building could begin.
Israel has said it would keep major West Bank settlement blocs, which are mainly near the Israeli border, under any peace accord with the Palestinians.
Israel withdrew in 2005 from the Gaza Strip, now governed by Hamas.