Story highlights The Prime Minister will allow more houses in the Kiryat Arba settlement

A settlement watch group condemns the expansion

(CNN) Israeli Prime Minister Benjamin Netanyahu has decided to allow the expansion of a West Bank settlement in the wake of the stabbing death of a 13-year-old Israeli-American girl, an Israeli official told CNN Sunday.

Hallel Yaffa Ariel was sleeping when a Palestinian teenager entered her house in Kiryat Arba, a settlement near Hebron, and killed her Thursday. He was shot to death in the home by settlement security guards, authorities said.

Hallel Ariel

"It was decided yesterday to allow the building of 42 units in Kiryat Arba, in the neighborhood close to the house in which the attack took place," an Israeli official said. "It was decided to set up a graveyard for the bodies of terrorists."

Netanyahu and the Minister of Defense Avigdor Lieberman made the decision Saturday after visiting mourners in Kiryat Arba, the official said.

Peace Now, an Israeli organization that tracks expansion of settlements, immediately rebuked Israel's decision as counterproductive to the peace process and influenced by domestic politics.

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