Defence Minister, Avigdor Lieberman and Prime Minister Benjamin Netanyahu say they had agreed to the move in response to housing needs.
Meanwhile, Palestinian officials say the plans undermined peace hopes by building on land they want for a future state.
It is the second of such announcement by the Israeli authorities since US President Donald Trump took office.
About 500,000 Jews live in about 140 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem. The settlements are considered illegal under international law, though Israel disputes this.
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