Tenders to build 20 housing units in the Maskiot settlement in the north of the occupied West Bank were issued after the green light was given from the defence ministry, it said.
The news came on the same day that Prime Minister Benjamin Netanyahu was to meet Obama in Washington for the first time since both assumed power earlier this year, and amid deep disagreements over the peace process.
Israeli settlements in the West Bank are among the main obstacles in the stumbling peace talks with the Palestinians.
Obama's administration has said several times that Israel should stop all settlement activity, in line with the obligations that it undertook as part of the 2003 international "roadmap" peace plan.
Netanyahu, who heads a largely right-wing government in favour of expanding Jewish settlements, is expected to tell Obama that Israel will continue construction in existing settlement blocks, a senior aide told AFP last week.
The construction in Maskiot, site of a former Israeli military base, was authorised by the government in late 2006 in part to rehouse Israelis who had been removed from settlements in the Gaza Strip in 2005.
More than 280,000 Israeli settlers currently live in the occupied West Bank and some 200,000 live in settlements in annexed east Jerusalem, according to the Peace Now anti-settlement watchdog.
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