Tuesday's announcement is the third such declaration since US President Donald Trump took office. Prime Minister Benjamin Netanyahu is keen to appease hardliners following the demolition of the illegal Amona settlement.
Israel's nationalist government is pressing forward with its construction binge, days after it set out plans to build 2,500 homes in the West Bank and 550 homes in East Jerusalem.
A statement from Israeli's Defense Ministry said Tuesday's decision would fulfill demand for housing and "return to life as usual".
Both the West Bank and East Jerusalem are claimed by Palestinians as part of its future independent state. While Israel captured the two areas during the 1967 Mideast war, the Palestinians' cause has wide international backing.
However, Israel's emboldened settlement expansion comes amid signals from US President Donald Trump that Washington plans to be far friendlier towards such projects than previously under President Obama.
Orthodox Jews hold Hebrew signs reading "Trump" outside a Republicans Overseas Israel event in Jerusalem during the election campaign.
Resetting relations under Trump
The Trump administration has so far remained muted on Israel's recent settlement plans, a dramatic departure from the vocal condemnations issued by the Obama administration, which culminated in December when the US abstained on a UN Security Council votecondemning settlements.
"We are in a new period in which life in Judea and Samaria (the Israeli government's term for the West Bank that excludes East Jerusalem) is back," Israel defense minister, Avigdor Lieberman, said on Tuesday announcing the latest settlements.
Trump is scheduled to meet with Israeli Prime Minister Benjamin Netanyahu at the White House on February 15, where they expected to discuss Israel's construction plans in the West Bank.
Trump has also appointed a prominent US supporter of settlements as his ambassador to Israel and plans to move the US embassy from Tel Aviv to Jerusalem.
Amona demolition prompts fury
Tuesday's announcement was likely an attempt to calm ultranationalist anger that had threatened to rupture Netanyahu's narrow coalition. A military order issued a day prior on Monday had forced residents in Amona to evacuate the settlement within 48 hours ahead of its demolition. Israel's Supreme Court had ruled in 2014 ruled that it was an illegally built outpost on private Palestinian land. All settlers are to be relocated.
Built more than 20 years ago, Amona is the largest of around 100 West Bank outposts erected without permission; a practice that, while illegal, is generally tolerated by Netanyahu's hardline coalition.
The Prime Minister has struggled to balance settler constituents, who make up a large part of his allies and support base, and Israel's Supreme Court which often finds itself ruling against settler communities.
dm/jr (AP, Reuters)