Israeli authorities have green-lighted the construction of 800 new settler homes in the occupied West Bank.

Israel's Defence Ministry said on Monday it had approved a planning stage for the housing earlier this month - an initial step in a protracted bureaucratic process, with construction not expected to begin for months.

Settlement watchdog Peace Now swiftly criticised the announcement.

"This is yet another move that threatens to derail the peace process," group spokesman Lior Amihai said.

Mahmoud Abbas, President of the Palestinian Authority, has warned that ongoing settlement-building by Israel in the Palestinian territories threatens the future of Middle East peace talks, which stand at an impasse little more than three months after they began.

The Palestinians want the West Bank, along with East Jerusalem and the Gaza Strip, to become part of a future state.

The new homes would be built north of Jerusalem in the settlements of Givat Zeev, Nofei Prat, Shilo, Givat Salit and Nokdim, Amihai said.

The latest move comes two weeks after Israel announced its largest plan for settler homes ever, saying some 20,000 would be built in the West Bank.

But Israeli Prime Minister Benjamin Netanyahu cancelled the order after pressure from the United States, which brought the two sides to the table in July.

If peace talks end with no deal, the Palestinians have vowed to pursue legal action against Israel's illegal building through international courts.