Maale Adumim, east of Jerusalem, will house about 70% of the dwellings, with the remaining residences being constructed nearby in Kedar and Efrat, south of Bethlehem.
According to a minister, the building is a reaction to a terrorist incident that took place two weeks ago near Maale Adumim that left many dead.
The plans, which are apparently the first to be approved since June, were denounced by the Palestinian Authority.
Since Israel conquered the West Bank and East Jerusalem in the 1967 Middle East war—land that the Palestinians desire for a future state—it has constructed over 160 settlements that house nearly 700,000 Jews.
The vast majority of people around the world believe that the settlements are illegal.
