Jerusalem city council published a statement saying that between January 1 and June 30 work began on 2,100 homes in the city.
It did not say where construction was taking place, in line with Israel's definition of the whole city as in integral and indivisible part of the Jewish state.
But Hagit Ofran, of settlement watchdog Peace Now, told AFP in response to a query that about a quarter of the new homes were in settlements in the Arab areas occupied by Israel in the 1967 Six-Day War.
The occupied east of the city was later annexed in a move never recognised by the international community.
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"We're talking about approximately 500" homes, Ofran said, adding that the figures were broadly in line with recent years.
The Palestinians want east Jerusalem as the capital of their promised state and Israeli settlement building there is a source of constant international criticism.
Figures provided by the municipality say there are about 306,000 Palestinians living in east Jerusalem, whose civil status is that of residents, not citizens. They account for 38 percent of the city's overall population.
Some 200,000 Israeli settlers also live in east Jerusalem.