According to the Israeli newspaper Haaretz, the proposals for new settlements in the zone known as E1 were added to the Defence Ministry's planning agenda at the "last minute".
Israel had always held back from building in the barren hills east of Jerusalem, under international pressure. Until now.
The planned development risks dividing the West Bank and restricting Palestinian access to East Jerusalem, which they want to be their future capital. Palestinians say the E1 settlement would torpedo their chances of creating a viable state as their country would be cut in two.
Some Israelis agree: "It will not be possible to create a Palestinian corridor from North to South, it is sending the Palestinians to the desert to go around in order to develop their country, this will prevent the two state solution," said Hagit Ofran of the organisation Peace Now.
Dozens from the Meretz political party demonstrated in front of the Foreign Ministry, making it clear they were against the planned settlements, and calling on the government to halt further construction.
It led to a lively exchange with a passing motorist. Michael Ben-Ari is the co-founder of a new Israeli nationalist party, Strong Israel, and who reportedly lives in an Israeli settlement in the West Bank.