The Israeli government says it plans to build 700 new homes in two settlement blocs in the occupied West Bank.
Maale Adumim is one of the largest settlements in the West Bank
Adverts published in Israeli newspapers invite bids for work in Maale Adumim just outside east Jerusalem and Beitar Illit to the south, near Bethlehem.
It is the biggest expansion of Jewish settlements to be announced since the government came to office in May.
Palestinians see such moves as an obstacle to peace and the creation of an independent Palestinian state.
The Israeli government froze a controversial project to link Maale Adumim to east Jerusalem following sharp American criticism.
The two settlement blocs are among the largest in the West Bank, occupied by Israel since 1967, together housing about 60,000 settlers.
Israeli Prime Minister Ehud Olmert was elected on a plan to withdraw unilaterally from parts of the West Bank and annex several large settlement blocs.
However, the plan has been suspended since Israel's war in Lebanon with the militant group Hezbollah.
"What I thought was the right thing to do in the Palestinian sphere several months ago has changed now," Israel radio quoted Mr Olmert as telling parliament's Foreign Affairs and Defence Committee.
During the conflict Hezbollah fired about 4,000 rockets at northern Israel, raising concern that a partial West Bank pullback could leave central Israel cities vulnerable to similar attacks by Palestinian militants.
About 240,000 Jewish settlers and 2.4 million Palestinians live in the West Bank. The settlements are deemed illegal under international law, although Israel disputes this.