Prime Minister Benjamin Netanyahu got legal approval on Wednesday for his plan to remove five settler buildings erected on private Palestinian land and was expected to win a showdown in parliament over the issue later in the day.
The right-wing leader made the proposal after being thrust into a political minefield by a Supreme Court ruling that determined the apartment houses in Beit El settlement in the occupied West Bank were built illegally and must be demolished by July 1.
Officials said Israel's attorney general gave Netanyahu the nod for the plan, opposed by settlers and ultranationalist politicians, to move the dwellings where 30 families live from the disputed tract to a nearby military zone.
Under the proposal, Netanyahu wants to build 300 new housing units in the West Bank, an apparent bid to appease settlers and their supporters - his traditional power base - but a step also likely to anger Palestinians and draw international criticism.
Parliament will debate later in the day two bills that would circumvent the Supreme court by retroactively legalising those dwellings and thousands of others that have been built on land owned by individual Palestinians and which could face legal challenges.
Palestinians fear Israeli settlements, built on land Israel captured in a 1967 war, will deny them a viable state.
The UN World Court considers the settlements illegal but Israel, citing historical and Biblical links to the territory, disputes this.
Netanyahu has threatened to fire any member of his government who votes in favour of the legislation. Political pundits predicted the measures would not be approved, especially after his main far-right ally, Foreign Minister Avigdor Lieberman, announced he would not back the bills.
"The majority support the prime minister's position," a government official said.
But a victory for Netanyahu now could exact a political price later. Defeating the bills would likely leave a reservoir of resentment against him in his own pro-settler Likud party and among the settler community.
Facing down a clutch of Likud rebels, Netanyahu also has the support of the centrist Kadima party, the major partner in a coalition government - one of the biggest in Israel's history - that he formed last month.
Calculating the political fallout in moving against the settlers, Netanyahu also had to factor in the wider public outcry he would likely have caused had he been seen as defying the Supreme Court.
Many Israelis view the court as an important independent watchdog over the government.