Israel is to build 3,000 new settler homes in east Jerusalem and the West Bank after the Palestinians won recognition as a non-member state at the United Nations, an Israeli official told AFP on Friday.

Asked if he could confirm a report that Israeli Prime Minister Benjamin Netanyahu had decided tp build the 3,000 units in response to the Palestinians success at the UN, he said: "It's true -- in (east) Jerusalem and the West Bank," without saying exactly where.

The decision was revealed in a tweet by the diplomatic correspondent of Haaretz newspaper, who said some of the homes would be built in E1, a highly-contentious area of the West Bank which links annexed east Jerusalem with Maaleh Adumim settlement.

"Political source: Netanyahu decided to build 3,000 new housing units in east Jerusalem and in settlements in the West Bank in response to the Palestinian action at the UN," said a Hebrew tweet by Barak Ravid.

"Despite the commitments he gave to (US) President (Barack) Obama, PM Netanyahu gave the order to advance construction in the E1 area between Maaleh Adumim and Jerusalem which will cut off the northern part of the West Bank from the south," he said.

Israel had pledged to freeze the E1 project as part of its commitments under the international roadmap for peace which was launched in 2003.

The Palestinians bitterly oppose the project as it effectively cuts the occupied West Bank in two, making the creation of a viable Palestinian state highly problematic.