Israel plans to build 50 new homes for settlers in the West Bank, days after US President George W Bush urged it to stop expanding settlements.
West Bank settlement expansion has drawn censure from the US
The Israeli authorities invited companies to bid for the contract to build the new homes at Elkana.
An official said construction of the homes could start in eight to 12 weeks.
President Bush last week called on Israel to stop building new homes in the West Bank, on land Palestinians claim as part of a future state.
The international community considers all settlements in Gaza and the West Bank, including East Jerusalem, as illegal under international law, though Israel disputes this.
No action specified
The new homes are due to be built on land in the northern West Bank, near the border with Israel.
At a meeting with Israeli Prime Minister Ariel Sharon last week, President Bush said the expansion of West Bank settlements - particularly in East Jerusalem - violated the "roadmap" peace plan.
"I told the prime minister of my concern that Israel not undertake any activity that contravenes roadmap obligations or prejudices final status negotiations," he said.
However, the US president did not specify what, if any, action might be taken against Israel if it construction continued.
Mr Bush also praised Prime Minister Sharon for spearheading a plan to withdraw settlers and soldiers from Gaza this year.
Mr Sharon's government is said to be considering delaying the withdrawal by a few weeks until mid-August, to avoid conflict with orthodox Jews who observe a period of mourning for the destruction in biblical times of two temples.