Israel is moving forward with plans for more than 1,000 new homes in two illegal settlements in the occupied West Bank in a move denounced by the Palestinians.

The Peace Now settlement watchdog said on Thursday that plans to build 538 new homes in the northern settlement of Itamar and to legalize 137 existing illegal units there were submitted to regional Israeli authorities this week for review.

Itamar is a relatively small, isolated settlement southeast of Nablus and surrounded by Palestinian villages. If approved, the plans would enlarge Itamar almost five - fold.

Also submitted for review were plans for 550 homes in Bruchin, of which 52 of them have already been built, said Peace Now ' s Hagit Ofran.

Bruchin is a former wildcat outpost that was retroactively authorized by the Israeli regime in April in a decision that brought a statement of " concern " from EU foreign policy chief Catherine Ashton.

Ofran said that while the Itamar expansion had been expected, the scope of the planned building at Bruchin came as a surprise.

" In Bruchin there are about 50 permanent homes and another 50 mobile homes, " she told AFP.

" I didn ' t know that they were going to propose enlarging the settlement tenfold, " she said.

The Palestinians lambasted the move as a " serious challenge " and demanded a response from Washington, the European Union and the international community.

" We consider these new decisions over Israeli settlements in the West Bank to be an abortion of the US administration ' s efforts, " snapped Nabil Abu Rudeina, spokesman for Palestinian president Mahmud Abbas.

" This policy of settlement building will not lead to peace, but to tension and instability in our region and the world, " he said.

Palestinian Foreign Minister Riyad al - Malki made similar remarks in talks with British foreign office minister Alistair Burt on Wednesday.

" Settlement building is killing the two - state solution, " he said.

On June 11, Egyptian Foreign Minister Mohamed Kamel Amr called on Tel Aviv to halt its illegal settlement activities in the occupied West Bank and withdraw settlers from Palestinian territories.

Last month, the Israeli regime also announced plans to build 1,000 new settler units in East al - Quds(Jerusalem).

More than half a million Israelis live in over 120 illegal settlements built since Israel’s occupation of the Palestinian territories of the West Bank and East al - Quds in 1967.