JERUSALEM - An Israeli committee on Wednesday approved construction of 500 new homes in the West Bank settlement of Shilo and retroactively legalised more than 200 built without permits, a spokesman said.

The committee, which falls under the auspices of the defence ministry, approved "construction of 500 units," civil administration spokesman Guy Inbar told AFP.

He also confirmed reports that more than 200 homes which were built without a permit, some in the nearby settler outpost of Shvut Rachel, would be legalised. "Yes it's true -- they will be legalised for humanitarian reasons," he said.

The civil administration is the military body which manages all civilian affairs, including building and planning issues, in portions of the West Bank under full Israeli military and civilian control.

Press reports said some of the 200 homes which would be granted legal status were in Shilo, a settlement with 2,000 residents 30 kilometres (18 miles) from Nablus. Others would be in Shvut Rachel, a nearby outpost home to 400 people, and the government has pledged to retroactively legalise.

The plans provoked an angry reaction from the Palestinian Authority, which said the aim was to destroy any chance of a two-state solution to the decades-long conflict.

"These decisions are designed primarily to attack and destroy the option of the two-state solution," Palestinian negotiator Saeb Erakat told AFP. "We strongly condemn this new settlement decision, which once again confirms beyond any doubt that the government of Israel has chose settlement instead of peace."

He also pointed the finger at the Quartet of Middle East peacemakers, which comprises diplomats from Russia, the United Nations, the European Union and the United States.