Israeli Prime Minister Benjamin Netanyahu and Interior Minister Gideon Saar have agreed to build 1,500 new homes in the east Jerusalem settlement of Ramat Shlomo, Israeli army radio said Wednesday.
The early-morning report came shortly after Israel freed 26 veteran Palestinian prisoners alongside US-brokered peace talks.
Last week, an Israeli official said new tenders were to be announced in the large settlement blocs and in east Jerusalem "in the coming months" as part of "understandings" reached with both the Palestinians and Washington.
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The Palestinians -- who view continued settlement construction as a major obstacle to peace -- flatly denied any such agreement.
In August, Israel announced plans for more than 2,000 new settler homes in tandem with the first prisoner release, angering the Palestinians.
In March 2010, Israel sparked the ire of the US administration by announcing, during a visit by Vice President Joe Biden, that 1,600 new homes would be built in Ramat Shlomo.
Israel captured east Jerusalem during the 1967 Six Day War and later annexed it in a move never recognised by the international community.
The radio said that Netanyahu and Saar also agree to push ahead with two other east Jerusalem projects; an archaeological and tourist centre just outside the Old City walls and a national park on the slopes of Mount Scopus.