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
The head of a controversial US and Israeli-backed aid group has defended its work after repeated...
The decision was taken "to put America's interests first" and followed a Department of Defense review...
