Public radio quoted Netanyahu as telling US President Barack Obama in talks in Washington Wednesday to "study the facts and details before making statements" about the settlement plan.
The approval of 2,610 new housing units in Israeli-annexed Arab east Jerusalem drew condemnation from Washington, with White House spokesman Josh Earnest warning that the move would "distance Israel from even its closest allies".
Netanyahu told Israeli journalists after the meeting that the plans had been in the pipeline for two years.
Housing Minister Uri Ariel told Israeli army radio that 1,000 of the units would "go to Arabs," but did not elaborate.
Peace Now, an Israeli group that monitors the building of settlements, said it was extremely unlikely that any Palestinians would be allowed to live in the new settler homes in the neighbourhood of Givat Hamatos.
The lands included in the plan are owned by the state, which will also publish the tenders, it said.
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"Previous experience shows that the tenders in east Jerusalem are for Israelis," the group said in a statement.
"Out of approximately 55,000 units built by the government in east Jerusalem neighbourhoods... virtually none were sold to Palestinians," it added.
Israel's settlement building in the occupied West Bank and annexed east Jerusalem, which is illegal under international law, has caused the breakdown of several rounds of peace talks.
The settlements are built on land the Palestinians want for their future state, whose capital would be in east Jerusalem.
Some 200,000 settlers live in east Jerusalem neighbourhoods, as well as some 306,000 Palestinians, according to Jerusalem's municipality.