Israel's Prime Minister Benjamin Netanyahu. REUTERS/Jack Guez/Pool

The Palestinian presidency said Israel had decided "to speed up the destruction of the peace process" today by deciding to accelerate the construction of settlements on land where the Palestinians aim to found an independent state, the spokesman for the Palestinian presidency said.

Nabil Abu Rdainah, spokesman for President Mahmoud Abbas, also described as "inhumane" Israel's decision to temporarily halt transfers of funds to the Palestinian Authority.

Israeli Prime Minister Benjamin Netanyahu earlier called for the accelerated construction of some 2,000 housing units in areas in the West Bank and around Jerusalem, an official statement said.

The statement came after Netanyahu called a special cabinet session to discuss the granting of full membership to the Palestinians by UNESCO, the UN cultural agency, a move opposed by Israel and the United States.

A senior government official said after the meeting that the cabinet had also decided to halt money transfers to the Palestinians Authority as a temporary measure until a final decision was made.

"You can't demand from the Israeli public to continue to show restraint when the Palestinian leadership continues to slam the door in their face," said the official, speaking on condition of anonymity.

The statement said the new building will be in "areas that in any future arrangement will remain in Israel's hands".

The official said 1,650 of the new tenders are for units in eastern parts of Jerusalem, and the rest are for Efrat and Maale Adumim, Jewish settlements in the occupied West Bank.

In the absence of peace talks, which collapsed about a year ago in a dispute over settlement building, Palestinian President Mahmoud Abbas has been seeking statehood recognition from the United Nations.

The Palestinians are looking to establish a state in the West Bank, Gaza Strip and East Jerusalem, land Israel seized in the 1967 Middle East War.

On Monday, UNESCO granted the Palestinians full membership. Israel called the move a "tragedy" that would hurt peace efforts, and the United States said as a result it would stop funding the organisation.

Hackers disrupted Palestinian Internet services in the West Bank and Gaza Strip today, the Palestinian telecoms minister said, alleging that a foreign government was behind the interference.

"All Palestinian IP addresses have been exposed to a focused, organised attack from abroad," Mashour Abu Daqqa told Reuters. "I think this is organised by a state. This is my prediction," he said.

Abu Daqqa said technicians from telecoms firm Paltel , an Internet services provider, were working to resolve the problem which also prevented users from viewing foreign websites. They had identified fake servers behind the disruption, he added.

"It's between slow and stopped altogether," said Ghassan Khatib, spokesman for the Palestinian Administration in Ramallah.

In separate remarks to the Palestinian news agency WAFA, Abu Daqqa said the attack was linked to the Palestinians' admission to the United Nations' cultural agency UNESCO on Monday - a diplomatic success for the Palestinians and a move opposed by Israel.