Israel has advanced the process of building 942 more settler homes in east Jerusalem under a new fast-track plan to tighten its grip on the territory, which the Palestinians claim as the capital of a future state.
A government planning committee moved the project to the advanced stage of asking contractors to submit bids to build them, the Interior Ministry has said.
Once a bid is awarded, construction can begin on the project in the Gilo area, though it can take months, if not longer, to reach that point.
An additional 300 units can be built after further planning, said lawyer Daniel Seidemann, an expert on Jerusalem construction who sees the building as an obstacle to peacemaking. About 40,000 Israelis live in Gilo.
"With God's help, we will continue to live and build in Jerusalem, which will remain united under Israeli sovereignty," Israeli prime minister Benjamin Netanyahu said at the campaign launch event of his Likud Party. "We will continue to strengthen the settlements."
Israeli elections are set for January 22.
Nabil Abu Rdeneh, a spokesman for Palestinian president Mahmoud Abbas, said the new Israeli announcement was a "red line" that would block the chance for a two-state solution to the Israeli-Palestinian conflict, in which a Palestinian state would be established alongside Israel.
"The Palestinian Authority will take all the possible means available to respond to this," said Mr Abu Rdeneh. The statement was posted on the official Palestinian news agency Wafa.
The newly-approved homes are among more than 5,000 new settler homes in east Jerusalem that Israel pressed ahead over the past week.
Palestinians do not recognise Israel's 1967 annexation of the territory and say any Israeli construction there undermines their claims to it. The international community has not recognised Israel's 1967 annexation of east Jerusalem.