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The government of Prime Minister Ehud Olmert on Monday said it was seeking bids for construction of 700 housing units in the West Bank - its largest settlement construction project since taking office in May.
The Construction and Housing Ministry published ads in Israeli newspapers requesting proposals for the new construction in Ma'aleh Adumim and Betar Illit, both outside Jerusalem.
Ministry spokesman Kobi Bleich confirmed the project is the largest so far by the new government. Previously, the government issued bids to build 98 homes in other projects.
Despite his calls for a withdrawal, Olmert has repeatedly said Israel would keep major settlement blocs - including Ma'aleh Adumim and Betar Illit - under any final peace deal with the Palestinians. In all, more than 60,000 people live in the two communities.
Since the recently ended war in Lebanon, Olmert has frozen his withdrawal plan - leaving the future of Jewish settlements throughout the West Bank up in the air.
The US and other foreign governments do not recognize the settlements, and consider settlement construction an obstacle to Mideast peace. However, US President George Bush has signaled that he would agree to Israel holding on to major settlement blocs under a peace agreement.
US Embassy spokesman Stewart Tuttle said any final borders between the sides should be reached through agreement.
"The US position hasn't changed: the Israeli government shouldn't expand the settlements," he said. "Even if these units are part of the big blocs that Olmert intend to keep as part of his realignment plan, the US position is that the borders between Israel and a future Palestinian state should be negotiated.
The Peace Now group, which advocates the dismantling of settlements, said it expects the Olmert government at the very least to freeze settlement expansion, as it promised to do when it accepted the US-backed "road map" peace plan more than three years ago.
Peace Now official Yariv Oppenheimer said Israel should also honor its promise under the road map to take down at least two dozen unauthorized settlement outposts.
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