Israel has authorised the construction of 3,000 more housing units in occupied East Jerusalem and the West Bank, according to Israeli officials.
It is also speeding up the processing of 1,000 planning permissions.
The decision comes a day after a vote at the UN General Assembly upgraded the Palestinians' status at the UN to that of non-member observer state.
The US said the expansion plan was counterproductive and would make it harder to resume peace talks.
Earlier Palestinian President Mahmoud Abbas called for an end to settlement building and a return to peace talks.