The Jerusalem municipality has approved a controversial plan to build 900 new homes in the Gilo neighborhood of eastern Jerusalem.
The construction still must be approved by the Interior Ministry; building would not begin for at least a couple of years.
Approximately 40,000 Jews are now living in Gilo.
The project, proposed in 2009, has been criticized by the Obama administration as making it more difficult to restart negotiations between Israel and the Palestinians, and a Palestinian Authority spokesman said it destroys any attempt to restart the peace process.
Nabil Abu Rudeinah, a spokesman for PA President Mahmoud Abbas, told the Palestinian Ma’an news agency that the plan “shatters any attempt to lay down foundations that can lead to a real peace.”