Israel is close to giving final approval for the construction of new homes for Jewish settlers at Maskiot, in the occupied West Bank.
The plan allows for 20 new homes at an abandoned Israeli military base in the Jordan Valley.
An official was quoted as saying the plan now only required the approval of the Defence Minister, Ehud Barak.
Israel originally shelved plans for construction at Maskiot following international pressure in 2006.
Palestinians say continued settlement building is a threat to the peace process revived last November.
Palestinian negotiator Saeb Erekat criticised the Israeli move. "This is undermining us, and killing and destroying the peace process," he said.
Jewish settlements in the West bank are considered illegal under international law, though Israel disputes this.
Israel Radio reported that the revival of the Maskiot plan was part of a deal between the Defence Ministry and settler leaders under which settlers would agree to evacuate West Bank outposts they established without Israeli government approval.
Israel has occupied the West Bank since 1967, settling more than 430,000 people in the area, including East Jerusalem.
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