Israel has carried out only 3% of its own demolition orders in Jewish settlements in the West Bank, Israeli anti-settlement campaigners say.
Settlement building continues despite pledges, Peace Now says
In the past 10 years, nearly 3,500 demolition orders were issued but just over 100 were observed, the Peace Now group says, citing government figures.
Palestinian negotiator Saeb Erekat has asked the US to block Israeli plans for 300 new homes in east Jerusalem.
Israel argues that the building does not contravene its peace commitments.
The Israeli housing ministry has announced a tender for 307 housing units in the Har Homa settlement.
It is the first such move since Israeli-Palestinian negotiations were relaunched at the US-sponsored meeting in Annapolis last week.
According to Peace Now, the Israeli military handed it 3,449 files on illegal buildings in settlements over the past decade but only 107 have been dismantled.
A further 171 structures were evacuated by their tenants.
"On the one hand Israel promises not to build new settlements and not to develop the existing settlements... but in reality the construction works continue vigorously," the group said in its report.
Mr Erekat said he had sent an urgent message to US Secretary of State Condoleezza Rice, asking her to block the Har Homa project.
"This is undermining Annapolis," he said, referring to the new peace talks begun last week at the Annapolis conference in the US.
Yariv Oppenheimer, head of Peace Now's settlement watchdog, said the new tender raised questions about Israel's intentions.
"The decision to construct now is a provocation that raises questions about Israel's readiness to negotiate a peace deal," he told Agence France-Presse news agency.
Mark Regev, spokesman for Israeli Prime Minister Ehud Olmert, said the government made a clear distinction between the West Bank and East Jerusalem, "which falls under Israeli sovereignty".