Talks between the two sides are stalled over continued building of settlements in the West Bank
The ministry is expected to approve the building of a further 2,700 homes, an official has said.
This comes weeks ahead of expected moves by the Palestinian
Authority to have a Palestinian state recognised at the United Nations.
The campaign for recognition is strongly opposed by Israel.
Direct talks between the two sides are stalled, and there are no known current initiatives to get them re-started.
The Israeli announcement has been criticised by Palestinian officials.
"We strongly condemn the new Israeli decision," Palestinian negotiator Saeb Erekat told the AFP news agency.
"[I urge the US] to reconsider their position rejecting the
Palestinian move to go to the UN for recognition of a Palestinian state…
We call on [US President Barack Obama] to support this approach because
it is the only way to preserve the two-state solution."
'Economics not politics'
A spokesman for the interior ministry, Roei Lachmanovich, told
AFP minister Eli Yishai had given approval for "1,600 homes in Ramat
Shlomo and will approve 2,000 more in Givat Hamatos and 700 in Pisgat
Zeev".
The approval of 1,600 homes in Ramat Shlomo caused a
diplomatic row between the US and Israel. The initial go-ahead for the
homes was initially given in March 2010 as US Vice-President Joe Biden
was on a visit to Israel pressing for the resumption of
Palestinian-Israeli peace talks.
Mr Lachmanovich insisted that that the approval for the settlement homes was "economic" not political.
Israel is currently experiencing nationwide protests over the
high cost of living. One of the central issues is the lack of
affordable housing.
"These are being approved because of the economic crisis here
in Israel, they are looking for a place to build in Jerusalem, and
these will help," he said. "This is nothing political, it's just
economic."
Last week, the interior ministry issued a final green-light
for the construction of 900 new homes in the East Jerusalem settlement
of Har Homa, which lies in the south-west of the city, beside Bethlehem.
Direct talks between the Palestinians and Israelis are
currently stalled over the Palestinian refusal to take part while the
Israeli government continues to build settlements in the West Bank.
The settlements are considered illegal under international
law, though Israel disputes this. Israel has occupied the West Bank
since 1967, and annexed East Jerusalem, a move not recognised by the
international community.
More than 500,000 Jewish settlers live in the West Bank,
including East Jerusalem, among a Palestinian population of about 2.5
million.
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