Hundreds of new homes for Israeli settlers in East Jerusalem have been approved, with an Israeli official saying the city's council had been "waiting" for US President Donald Trump to take office.

Key points: Permits approved for 560 units in three urban settlements annexed by Jerusalem but also claimed by Palestinians

Permits approved for 560 units in three urban settlements annexed by Jerusalem but also claimed by Palestinians UN Security Council passed anti-settlement resolution in December with support from Obama administration

UN Security Council passed anti-settlement resolution in December with support from Obama administration Netanyahu has said he looked forward to working with Trump to counter any effects of that resolution

The housing projects, on land that the Palestinians seek as part of a future state, had been taken off the Jerusalem municipality's agenda in December at the last minute at the request of Prime Minister Benjamin Netanyahu, in order to avoid further censure from the administration of Barack Obama.

The deputy mayor of Jerusalem said the permits for over 560 units in the urban settlements of Pisgat Zeev, Ramat Shlomo and Ramot had been held up until Mr Trump was sworn in.

"I was told to wait until Trump takes office because he has no problem with building in Jerusalem," deputy mayor Meir Turgeman told Israeli army radio.

Mr Turgeman said there were hundreds more units waiting for approval.

Mr Trump and Mr Netanyahu meanwhile held their first phone call, which the US President said was "very nice".

Mr Trump emphasised to Mr Netanyahu that Israel-Palestinian peace could only be negotiated directly between the two parties, the White House said.

It said the two leaders agreed to continue to closely consult in regional issues such as "threats posed by Iran", and that Mr Trump had invited Mr Netanyahu for a February meeting.

"Many matters face us. The Israeli-Palestinian issue, the situation in Syria, the Iranian threat," Mr Netanyahu earlier said in broadcast remarks at the start of his weekly cabinet meeting.

Senior ministers later voted unanimously to postpone discussion on a bill proposing the annexation of the West Bank settlement of Maale Adumim, home to 40,000 Israelis near Jerusalem.

A statement said the proposal would be put on hold until after Mr Netanyahu meets Mr Trump.

Israel's right wing expects Mr Trump's attitude towards settlements built in the West Bank and East Jerusalem — areas Israel captured in a 1967 war — to be far more supportive than that of his predecessor.

UN sees settlements as illegal

The Palestinians denounced the move to approve the new construction.

"We strongly condemn the Israeli decision to approve the construction," Nabil Abu Rdainah, spokesman for Palestinian president Mahmoud Abbas, told Reuters.

Israeli settlements in the occupied West Bank and East Jerusalem are seen as illegal under international law and by the United Nations (UN).

Last month, the UN Security Council passed a resolution condemning settlement building.

Prime Minister Malcolm Turnbull was one of the only world leaders to criticise the resolution, calling it ''one sided".

Israel views all Jerusalem as is its capital, but most of the world considers its final status a matter for peace negotiations.

The Palestinians have said that an embassy move would kill any prospect for peace. Negotiations broke down in 2014.

Moving US embassy likely to anger Arab world

In a proposal that has drawn a Palestinian outcry, Mr Trump has also pledged to move the US embassy from Tel Aviv to Jerusalem.

Mr Trump has also appointed a new US Ambassador to Israel, David Friedman, who is considered a settlements supporter.

The White House said on Sunday it was only in the early stages of talks to fulfil Mr Trump's pledge — which would likely spark anger in the Arab world.

"We are at the very beginning stages of even discussing this subject," White House spokesman Sean Spicer said in a statement.

Commentators in Israel have said it was too early to tell what Mr Trump's policy on these matters will actually be now he is in office.

ABC/wires