Israel will approve construction of hundreds of new homes in West Bank settlements before weighing a freeze sought by Washington in a move announced on Friday that fuelled Palestinian outrage.
The plan was also certain to anger the US administration which has been pushing for a settlement freeze in an effort to restart the Middle East peace process that has been at a standstill since December.
"In the next days the prime minister will approve construction starts and then he might consider a freeze for a limited time under certain conditions," an Israeli government official told AFP.
He confirmed a report in the Jerusalem Post that said Prime Minister Benjamin Netanyahu would consider a moratorium on settlement construction "for a few months" after the green light is given to build hundreds of new homes in the West Bank.
The English-language newspaper said work on 2,500 housing units which is already under way would continue.
"The only thing suspended by this announcement will be the peace process," Palestinian negotiator Saeb Erakat told AFP.
"This is absolutely unacceptable," he said, speaking by telephone from Paris where he is accompanying Palestinian president Mahmud Abbas.