Israel has long had the ambition to build in the roughly 12 square kilometre area east of Jerusalem known as E1, but the plan has been suspended for years due to international opposition.

It has been repeatedly stated by many politicians and experts that this settlement will undermine the hopes of a united Palestinian state with East Jerusalem as its capital .

"I am pleased to announce that a few minutes ago the civil administration approved the planning for the construction of the E1 neighborhood," Maale Adumim Mayor Guy Yifrach said on Wednesday.

All Israeli settlements in the West Bank, which has been occupied since 1967, are considered illegal under international law, regardless of whether they have received planning permission from Israel.

Last week, Israel's far-right Finance Minister Bezalel Smotrich made statements supporting plans to build about 3,400 homes on the highly sensitive land between Jerusalem and the Israeli settlement of Maale Adumim.

UN Secretary-General Antonio Guterres warned that building Israeli homes there would"end" hopes for a two-state solution to the Israeli-Palestinian conflict.

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Peace Now, an Israeli NGO that monitors settlement activity in the West Bank, said last week that infrastructure work on E1 could begin within a few months, while housing construction could begin in about a year.

Excluding East Jerusalem, the West Bank is home to approximately three million Palestinians and some 500,000 Israeli settlers.