Israeli ministers said Thursday they want to construct a new apartment building for settlers in the flashpoint city of Hebron in the occupied West Bank, in what would be a rare move.
The plan is in the early stages and details such as how many units the building would include have not yet been provided.
It will eventually require approvals from a defence ministry committee and will likely face a legal challenge.
The building would be constructed in a former market area in the heart of Hebron, where some 800 Israeli settlers live under heavy military protection amid around 200,000 Palestinians.
Israeli Defence Minister Avigdor Lieberman said in a statement he would "advance planning for a new apartment building above the old wholesale market in Hebron."
Justice Minister Ayelet Shaked said a "significant breakthrough" enabled the removal of obstructions for planning approval, without specifying.
The market area is on Hebron's Shuhada Street, once a bustling thoroughfare leading to a holy site where the biblical Abraham is believed to have been buried.
The street is now largely closed off to Palestinians who have repeatedly demanded that it be reopened to traffic.
Earlier this month, Israel approved construction of 31 settler homes in Hebron, the first such green light for the city since 2002.
Hagit Ofran of settlement watchdog Peace Now called the plans for the new building a "dramatic change".
"I can assure you that there will be a court case against it," she said.
She said there was early discussion of the new building containing 16 units, but that had not been confirmed.
Israeli settlements are considered a violation of international law and major stumbling blocks to peace efforts as they are built on land the Palestinians want for their future state.
The United States has traditionally urged Israel to hold off on settlement expansion, but President Donald Trump has been far less critical.
The US ambassador to Israel, David Friedman, has himself been a backer of Israeli settlement building.
Settlement approvals have soared since Trump took office, according to Peace Now figures.
Israel occupied the West Bank in the 1967 War.
*This story was edited by Ahram Online.