The green light has been given for the construction of more than 560 housing units in three East Jerusalem settlements.
The approval for permits from the Jerusalem municipality comes just two days after the inauguration of President Trump.
Officials say the permits had been suspended until the departure of Barack Obama, who had been critical of settlement building.
Palestinians have reacted angrily.
Hanan Ashrawi, an executive committee member of the Palestine Liberation Organisation, told reporters: “By targeting specifically Jerusalem, they are making use of the statements during the Trump election campaign about recognising Jerusalem as the capital of Israel and therefor legalising Israel’s illegal annexation of Jerusalem in order to expand its settlement activities in Jerusalem.”
Meanwhile, also under the spotlight is a bill being put forward by two pro-settlement MPs calling for the unilateral annexation of a large settlement in the West Bank, not far from Jerusalem, known as Ma’ale Adumim.
Israeli media reports say Prime Minister Benjamin Netanyahu is pushing to delay progress of the bill.
This reportedly after President Trump’s advisors asked Israel not to surprise the US with any unilateral move before the two leaders have a chance to meet.
Netanyahu is expected to have a phone conversation with Trump on Sunday.