The interior ministry confirmed the new construction, amid reports that Mr Netanyahu had turned down a direct request from Washington's envoy, George Mitchell, to halt the programme.
The Israelis claim that the settlement, Gilo, is now part of Jerusalem, which it has always said would not be included in any freeze that might be agreed to facilitate talks.
Gilo already houses 40,000 Israelis.
Israel approves 900 more settler homes
Thousands of Jewish ultra-Orthodox men clashed with Israeli police in central Jerusalem on Sunday during a...
Israeli tanks have advanced on the Gaza City district of Shujayea trapping civilians amid intense fighting,...
