Daniel Seiderman, a lawyer active in the anti-settlement movement, told AFP that the idea was endorsed at a city planning meeting last month.

"Ten days ago the municipal planning board deliberated on a plan to build another 2 500 units in Gilo," he said. "The precise area is beyond the municipal... line of Gilo."

He said the intended enlargement would be in addition to plans formally announced last month for 2 000 new homes in Gilo, which lies just a few kilometres north of Bethlehem.

City councillor Meir Margelit confirmed the broad outline of the intended scheme but not the number.

"It's correct that the local committee approved building in Gilo. I don't remember how many units," he told AFP.

"The planning committee approved (building) between Gilo and (the West bank town of) Beit Jala. I suspected that it's beyond the Gilo blue line but I couldn't check it completely."

Both men agreed the project could take a long time to reach fruition.

"If everything goes smoothly it's a matter of three years at least," Margelit said.

"If you're talking about... pregnancy, this isn't conception, just a glint in the eye," said Seiderman.

Palestinian president Mahmud Abbas's spokesman Nabil Abu Rudeina called on the US and its partners in the diplomatic Quartet – Russia, the UN and the European Union – to take action against the latest Gilo initiative.

"We demand... that Washington and the Quartet hold Israel responsible for the destruction of the peace process," Abu Rudeina told AFP from Paris, where Abbas is visiting.