The long-stalled project near Jerusalem, known as E1, further fragments lands envisioned as a Palestinian state, advancing a goal of Israeli hard-liners.

The Palestinian Authority says the decision is illegal and will "destroy" the prospects for a two-state solution.

But a crucial roadblock — discouragement from the United States — was lifted last week when Ambassador Mike Huckabee said the United States would not oppose E1. Huckabee is a longtime support of Israeli settlements in the West Bank.