JERUSALEM (AFP) — Israel approved a major settlement project on Wednesday in an area of the occupied West Bank that the international community has warned threatens the viability of a future Palestinian state.

Israel has long had ambitions to build on the roughly 12 square kilometres (five square miles) known as E1 that lie just east of Jerusalem, but the plan had been stalled for years amid international opposition.

Critics say the settlement would undermine hopes for a contiguous Palestinian state with east Jerusalem as its capital.

Last week, Israel’s far-right Finance Minister Bezalel Smotrich backed plans to build some 3,400 homes on the ultrasensitive parcel of land that lies between Jerusalem and the Israeli settlement of Maale Adumim.

UN chief Antonio Guterres warned that constructing Israeli homes there would “put an end to” hopes for a two-state solution to the Israeli-Palestinian conflict.

“I am pleased to announce that just a short while ago, the civil administration approved the planning for the construction of the E1 neighbourhood,” the mayor of Maale Adumim, Guy Yifrach, said in a statement Wednesday.

All of Israel’s settlements in the West Bank, occupied since 1967, are considered illegal under international law, regardless of whether they have Israeli planning permission.

Aviv Tatarsky, a researcher at the Israeli anti-settlement organisation Ir Amim, said: “Today’s approval demonstrates how determined Israel is in pursuing what Minister Smotrich has described as a strategic programme to bury the possibility of a Palestinian state and to effectively annex the West Bank.

“This is a conscious Israeli choice to implement an apartheid regime,” he added, calling on the international community to take urgent and effective measures against the move.

Israeli NGO Peace Now, which monitors settlement activity in the West Bank, said last week that infrastructure work in E1 could begin within a few months, and housing construction within about a year.

Excluding east Jerusalem, the West Bank is home to around three million Palestinians, as well as about 500,000 Israeli settlers.