Israel has given the go-ahead to build nearly 300 houses in a settlement near the occupied West Bank city of Ramallah, an army spokesman has said, in a move likely to spark tensions as Washington seeks to restart peace talks.

The army said on Thursday the plan was compensation for Israelis who were evicted last year from another settlement, Ulpana, an unauthorised outpost which was evacuated after a court ruling.

“The Civil Administration has given the green light for 296 housing units at Beit El, but this is only the first stage of a process before actual construction can begin,” the spokesman said on Thursday.

The announcement comes just two days after a report said Binyamin Netanyahu, Israel’s prime minister, had quietly ordered a freeze on tenders for new settler homes in a bid to give a chance to US-led efforts to revive stalled peace talks with the Palestinians.

Saeb Erakat, the Palestinian negotiator, responded to the announcement saying, “We condemn this new decision which is proof that the Israeli government wants to sabotage and ruin the US administration’s efforts to revive the peace process.”

“This is a message to the American adminstration and a blow to the peace process,” he said, pointing to the “intense” shuttle diplomacy being conducted by the US Secretary of State John Kerry to try to bring both sides back to negotiations.

“This aims to drag the region into violence instead of peace and stability,” Erakat added.

Hagit Ofran of Israel’s Peace Now settlement watchdog denounced the decision.

“This initiative proves Netanyahu is deceiving the world,” she said.

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