Controversial plans for the first new settlement to be built in the occupied West Bank in almost a decade have been revived by Israel's defence ministry, despite calls by the international community for a freeze on construction, which is illegal under international law.

A key planning committee at the ministry has approved a plan to build 20 homes in a new settlement in the Jordan valley to be called Maskiot. The defence minister, Ehud Barak, has not yet given his approval, although Israeli reports yesterday suggested the plan would go ahead soon.

The decision comes in the same week as two high-profile visits to Israel by Gordon Brown and Barack Obama, who both talked about the importance of a two-state solution to end the Middle East conflict.

All settlements in occupied territory are illegal under international law and Palestinian officials were quick to criticise the proposal.

"This is destroying the process of a two-state solution," said Saeb Erekat, a senior Palestinian negotiator. "I hope the Americans will make the Israelis revoke the decision. I think they can make the Israelis do this."

The US road map, which is the basis of the current peace talks, calls for a freeze on all settlement activity, but Israel has defended its recent decisions to go ahead with construction in East Jerusalem and in West Bank settlements that it believes will become part of Israel in any peace deal.

However the Israeli prime minister, Ehud Olmert, has promised not to build new settlements. Yesterday his spokesman, Mark Regev, said: "Israel will continue to honour our commitments. There will be no new settlements, there will be no expansion of existing settlements and there will be no expropriation of land for settlement construction." He said neither Barak nor Olmert had approved the plan.

During his visit to Israel and the West Bank, Brown said "settlement expansion has made peace harder to achieve".

It is not the first plan for a Maskiot settlement. Israel said two years ago that it planned to build Maskiot but the plan was frozen after international disapproval. Maskiot began as a military position, which is how many settlements started. Then a religious school was established, and this year several families arrived in mobile homes. The families were mostly religious Jewish settlers who had been withdrawn from Gaza in 2005, with more reportedly waiting to join them.

Yariv Oppenheimer, head of the Israeli group Peace Now, said pressure on the government from the settler movement often appeared to outweigh international pressure against expansion.

"I think it is very disappointing," he said. "It is paving the way to a one-state solution. We are afraid eventually that if there will be a peace treaty there will be so many settlements it will not be possible to implement it."

Settler leaders sounded buoyed by the news. "This should have been done a long time ago," Dubi Tal, chairman of the Jordan Valley regional council, told the Ma'ariv newspaper. "I welcome this decision with much hope and, with God's help, we will build and bring those expelled from Gush Katif to a safe place." Gush Katif refers to the settlers evacuated from Gaza three years ago.

There are more than 400,000 people living in Jewish settlements in East Jerusalem and the West Bank. A report in Ma'ariv said new figures from the interior ministry showed the West Bank settler population grew by 15,000 last year, a rise of 5.5%, with the sharpest rise in ultra-Orthodox settlements. That compares with a 1.8% rise for the Jewish population in Israel.

Palestinian officials said yesterday that a group of Jewish settlers had attacked a Palestinian village, Burin, near the West Bank city of Nablus, smashing cars and windows and cutting electricity wires. The attack was filmed by an Israeli group, Rabbis for Human Rights. The village was close to a settlement where an Israeli was arrested this month for allegedly trying to fire a rocket at the Palestinians.