The Israeli government has confirmed plans to increase the size of its largest settlement in the West Bank.
About 390,000 Jewish settlers already live in the West Bank
Approximately 3,500 homes are planned for Maale Adumim, east of Jerusalem.
The settlements at Ariel in the northern West Bank, and Gush Etzion, south of Jerusalem, are also expected to be expanded.
Israeli officials confirmed that Defence Minister Shaul Mofaz has approved the construction of the new homes in Maale Adumim.
Defence Ministry spokeswoman Shiri Eden said the expansion of the settlement is part of an overall development plan for Maale Adumim approved by the government in 1999.
Chief Palestinian negotiator Saeb Erakat said the Israeli plan threatened hopes of restarting the Middle East peace process.
"[This] sabotages all efforts seeking to get the peace process back on track," he told the AFP news agency.
"The Israeli government wants to determine Jerusalem's fate by presenting the settlements and wall as a fait accompli.
"We ask the Quartet and American President George Bush: what happened to the two-state vision and how can we have peace while settlements and the wall continue to be built?" Mr Erakat said.
Under the peace plan known as the roadmap, Israel pledged to freeze the growth of settlements on land occupied since 1967. The plan is sponsored by the "quartet" of the US, Russia, European Union and United Nations.
The international community considers all settlements in Gaza and the West Bank, including East Jerusalem, as illegal under international law, though Israel disputes this.
About 400,000 Jewish settlers live in Gaza and the West Bank, including East Jerusalem - alongside more than four million Palestinians.
Focus on Gaza
The BBC's Jonny Dymond in Jerusalem says that most attention in the region over the last few months has been focused on Israel's plans to withdraw from settlements in the Gaza Strip and evacuate settlers from the area.
But now the government has made it clear that while it pulls out part of the Palestinian territories, it plans to step up its presence in another, he says.
The Israeli defence ministry confirmed to the BBC that 3,500 housing units would be constructed between the largest West Bank settlement, Maale Adumin, and Jerusalem.
An official from the prime minister's office is reported as saying that building would continue in two other large settlements, because these settlements would never be transferred to the Palestinian Authority.
A spokesman for the US embassy in Tel Aviv said that Washington expected Israel to keep the commitments it made under the roadmap, and for Israeli Prime Minister Ariel Sharon to abide by the promises he made President Bush.
Earlier this month a damaging report commissioned by Mr Sharon found that Israeli ministries had methodically helped to build scores of unauthorised Jewish outposts in the West Bank.
Outposts are settlements that the Israeli government has not approved, considers illegal and has committed itself under the roadmap to dismantling.