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Jerusalem (AFP)

Israeli authorities were set Sunday to discuss granting building permits that would create the largest Israeli settlement inside a Palestinian neighbourhood, a watchdog group said.

Jerusalem city council's planning and construction committee was to examine issuing building permits for a settlement in the occupied east Jerusalem Palestinian neighbourhood of Jabel Mukaber, the Peace Now NGO said.

Committee members said Sunday the committee meeting was ongoing and they could not yet provide further details.

The permits would allow for an expansion of the Nof Zion settlement to add 176 housing units on top of the existing 91 units.

Plans for the new units have already been approved and the issuing of building permits is the last major bureaucratic step.

Peace Now and other settlement watchdogs say the approvals would make Nof Zion the largest Israeli settlement inside any Palestinian neighbourhood.

Most settlements, particularly in the occupied West Bank, are located outside of Palestinian residential areas.

"Within east Jerusalem, it's a very serious development," Peace Now spokeswoman Anat Ben Nun told AFP.

"It's indicative of a trend that we're seeing of settlement expansion inside Palestinian neighbourhoods in east Jerusalem."

Israel occupied east Jerusalem in the 1967 Six Day War and later annexed it in a move never recognised by the international community.

It sees the entire city as its undivided capital, while the Palestinians want the eastern sector as the capital of their future state.

The Israeli government has announced several settlement expansions since US President Donald Trump took office.

Trump has been far less critical of Israeli settlement expansion than his predecessor Barack Obama.

Israeli settlements are seen as illegal under international law and major stumbling blocks to peace as they are built on land the Palestinians see as part of their future state.

Jerusalem's status is ultra-sensitive and central to the Israel-Palestinian conflict.

Settlement watchdogs and Palestinians accuse far-right Israeli groups of pushing for settlements in east Jerusalem to ensure the city can never be divided.

Sunday's meeting comes as Prime Minister Benjamin Netanyahu leaves for the first ever Latin American trip by a sitting Israeli premier, followed by his annual appearance at the UN General Assembly.

He is due to visit Argentina, Colombia and Mexico before continuing to New York.

© 2017 AFP