Israeli state bodies have been secretly diverting millions of dollars to build unauthorised Jewish outposts in the West Bank, an official report says.
Peace Now estimates that there are 100 unauthorised outposts
Former state prosecutor Talia Sasson has recommended criminal investigations against those alleged to be involved.
Israel is meant to remove unauthorised outposts on Palestinian land under the US-backed roadmap peace plan.
Palestinian Foreign Minister Nasser Al -Kidwa said there would be "no peace" while settlement building continued.
Anti-settlement groups say more than 100 outposts have sprung up, normally consisting of small groups of mobile homes stationed close to existing settlements that are authorised by the Israeli government.
The international community considers all settlements in Gaza and the West Bank, including East Jerusalem, as illegal under international law, though Israel disputes this.
The report details how officials in the ministries of defence and housing and the settlement division of the World Zionist Organisation spent millions of dollars from state budgets to support the illegal outposts.
Ms Sasson called it a "blatant violation of the law" and said "drastic steps" were needed to remedy the situation.
It describes secret co-operation between various ministries and official institutions to consolidate wildcat outposts, which settlers began setting up more than a decade ago.
It was an initiative backed by Prime Minister Ariel Sharon, then foreign minister, who urged settlers to seize hilltops in order to break up the contiguity of Palestinian areas and prevent the establishment of a Palestinian state.
The report found:
- The housing ministry supplied 400 mobile homes for outposts on private Palestinian land
- The defence ministry approved the positioning of trailers to begin new outposts
- The education ministry paid for nurseries and their teachers
- The energy ministry connected outposts to the electricity grid
- Roads to outposts were paid for with taxpayers' money
Deputy Defence Minister Zeev Boim told Israeli Army Radio that the outposts "must be removed", but that nothing was likely to happen until the government's plan to withdraw from Gaza had been implemented.
"It is time for the international community to say 'enough' to Israel and work with the same determination as on other matters," said Palestinian Prime Minister Ahmed Qurei.
Israeli PM Ariel Sharon encouraged the building of illegal outposts
A US embassy spokesman in Tel Aviv also repeated Washington's longstanding call for Israel to remove the outposts.
Settler leader Shaul Goldstein said Mr Sharon should face questioning over the report's findings.
"It's obvious that the one who sent us in order to protect the roads and land is the prime minister so he should look in the mirror," Mr Goldstein said.
"Mr Sharon has to be questioned - not us."
A statement from Mr Sharon's office - which commissioned the report - said the matter would be discussed in the cabinet on Sunday.
About 400,000 Jewish settlers live in the West Bank, Gaza and East Jerusalem - alongside among than four million Palestinians. About 8,000 settlers and the soldiers that protect them are due to be withdrawn from Gaza starting in July.