Israel is to approve 2,000 new homes for Jewish settlers in the occupied West Bank, defence sources said Thursday, despite opposition from dovish members of the governing coalition.

The Palestinians swiftly condemned the latest settlement expansion plans, the first of Prime Minister Naftali Bennett's administration.

A security source told AFP the permits for Jewish settlements would come alongside approvals for hundreds of Palestinian homes in the large swathe of the West Bank known as Area C, where Israel exercises military and planning control.

"There is an expectation to approve about 1,000 housing units for Palestinians in Area C next week and 2,000 housing units in the Jewish communities," the source told AFP on condition of anonymity.

The office of Palestinian president Mahmud Abbas expressed its "strong rejection and condemnation" of the new settler homes, saying they contradicted "the clear American position" President Joe Biden expressed in a call with Abbas.

Biden is reportedly to meet with Bennett in the near future, although his office did not specify a date.

Bennett, a former director of the Yesha Council settler lobby, faced criticism from dovish partners in his coalition, as well as from Israeli settler advocates in the opposition.

Israel seized the West Bank and east Jerusalem from Jordan in 1967. Since then, nearly 700,000 Israelis have moved into settlements that most of the international community regards as illegal.

Palestinians hope the territories will become part of a future state.

The Yesha Council on Thursday deplored the fact that building permits for Israelis were being presented as linked to housing for Palestinians.

"Strengthening the Jewish presence in the heart of the homeland should not depend on building permits for the Arab population," Yossi Dagan, one of the group's leaders, said in a statement.

Seven lawmakers from the dovish Meretz party, three of them ministers, wrote to Defence Minister Benny Gantz opposing the approval of more homes for settlers.

"Settlements are immoral, settlements are illegal, they endanger our relations with Palestinians and the world," Meretz lawmaker Mossi Raz told public radio.

However, he stopped short of threatening to quit the ruling coalition.

Opposition lawmaker Bezalel Smotrich of the nationalist Religious Zionism bloc said on Twitter that approving homes in Palestinian towns was "harming Israeli communities".

According to an analysis by settlement watchdog Peace Now, the Higher Planning Council of the Civil Administration intends to approve about 860 homes for Palestinian villages, and just shy of 2,000 units in settlements.

Peace Now said the approvals for Palestinians came after years of rejection from uncooperative Israeli authorities.

"It is a very small expansion of the Palestinian villages and a drop in the ocean in terms of real Palestinian development needs," the group said.

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