ISRAEL HAS APPROVED plans to build another 523 homes in the West Bank, settlers said on Thursday, in the first step towards a new settlement “city” that drew furious Palestinian condemnation.

“After years, we are happy to announce that the government of Israel has decided to build a city in Gush Etzion,” David Perel, head of the the regional council there, told AFP.

He said the defence ministry had approved plans for 523 homes in Gevaot, part of the Gush Etzion group of settlements in the southern West Bank. The ministry itself did not immediately respond to requests for comment.

Perel said the council presented in 2000 plans for a city of at least 6,000 homes, but had not received any approval until now.

“This is a huge achievement,” he said.

According to Hagit Ofran from the Israeli settlement watchdog Peace Now, there are currently around a dozen caravans at the site, but she said the new city could house as many as 25,000 people.

“This is not just another settlement: 6,000 units could house about 25,000 people. Maybe it’s not large as cities go, but in terms of settlements, it’s huge,” she told AFP.

“This sends the message that Israel is not considering the two-state solution. It means it will be much harder to divide the land (in any final peace deal) with another city there,” she said.

The new plans emerged during a week in which Israel has advanced the building of thousands of new settlement homes in east Jerusalem and the West Bank, sparking widespread condemnation.

On Thursday, an interior ministry committee met to consider an application to build around 1,000 new units in the southern east Jerusalem settlement neighbourhood of Gilo.

It failed to reach a decision and will meet again next week, a spokesman said.

Critics say that planned Israeli building north, south and east of Jerusalem is meant to drive a wedge into Palestinian territory and stifle the creation of an independent Palestinian state.

“This circle will suffocate east Jerusalem and destroy the two-state solution; it will be the last nail in the coffin for the two-state solution,” Palestinian negotiator Saeb Erakat told reporters during a tour of the planned E1 settlement project, east of the Holy City.

“We in the Palestinian leadership are examining all our options,” he added. “If any of these projects are carried out, Israel will be held accountable.”

This appeared to be a veiled reference to the possibility that the Palestinians, having won upgraded UN status, may seek to join and then appeal to the International Criminal Court over Israeli actions.

The Palestinian condemnation followed criticism from EU foreign policy chief Catherine Ashton after Israel moved forward plans for thousands of homes in east Jerusalem settler neighbourhoods.

“I strongly oppose this unprecedented expansion of settlements around Jerusalem,” Ashton said in a statement on Thursday, warning the plans could “seriously undermine the prospects of a negotiated resolution of the conflict.”

Tony Blair, the envoy of the peacemaking international Quartet — the EU, United Nations, United States and Russia — also criticised the moves.

“The problem is not only the building of such settlements itself but also that this is a moment when it is vital to restart a proper negotiation, and all such announcements do is to put new obstacles in the way of progress,” he said.

On Wednesday alone, Israel moved forward plans for 3,658 new settler homes, mostly in annexed east Jerusalem.

The announcements came just two days after the approval of another 1,500 homes in east Jerusalem prompted Washington to denounce Israel for its “pattern of provocative action.”

The United Nations and all the Security Council members except the United States on Wednesday condemned the settlement moves, with UN Secretary General Ban Ki-moon warning that Israel was on a “dangerous path.”