The joint project undertaken by the Interior Ministry and the Jerusalem (al-Quds) Municipality sees the construction of 14,000 housing units near the West Bank city of Bethlehem, the Israeli daily Maariv reported on Wednesday.
The settlement will be built in three million square meters of land and will be home to 40,000 Jewish settlers.
The land will also include the property of the Palestinians in the West Bank village of Al-Walaja.
The project has the endorsement of the ruling Likud Party and its far right allies.
Israel is obliged to freeze all settlement construction projects in the West Bank and East Jerusalem. The regime, however, has so far refused to fulfill its commitments despite demands by the international community.
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