Building was under way at Adam settlement on Monday
Israeli Defence Minister Ehud Barak has denied any impasse with the US over Jewish settlement activity in the West Bank as talks ended without agreement.
Mr Barak met US envoy George Mitchell as the two allies are struggling to end a rare public rift over the issue.
The US wants Israel to stop all settlement activity in the occupied territory, but Israel wants to continue what it calls "natural growth".
The Palestinians refuse to restart talks without a settlement freeze.
"I don't think we are stuck," Mr Barak said after the meeting with Mr Mitchell on Tuesday.
He said the talks were "positive" although there were still differences, and later told Israeli radio the two sides were close to reaching a compromise.
Asked whether Israel would offer a temporary halt to settlement activity, of three to six months, Mr Barak said it was "a little bit too early to predict".
He said Mr Mitchell would meet Israeli Prime Minister Benjamin Netanyahu within the next three weeks.
A meeting scheduled last week between the two was cancelled, in what has been interpreted as a sign of Israeli-US tension.
Access and movement
A joint statement from Mr Mitchell and Mr Barak said they had discussed "the full range of issues related to Middle East peace".
These included "measures on security and incitement by the Palestinians; steps by Arab states toward normalisation with Israel; and, from Israel, actions on access and movement in the West Bank and on settlement activity", the statement said.
Israeli settlements in the West Bank and East Jerusalem, which Palestinians want for a future state, are seen as a major obstacle to peace. The Jewish population in these territories, occupied in the 1967 war, is thought to top 500,000.
On Monday, it emerged that Israel has approved the construction of 50 new residential units in Adam settlement, to house settlers evicted from an unofficial outpost.
The settlements are illegal under international law, although Israel disputes this.
Israel committed to freeze settlement activity under the 2003 "road map" peace plan.