Jerusalem -- Israel has approved a new settlement on a UNESCO World Heritage Site near Bethlehem in the occupied West Bank, its far-right finance minister said on Wednesday.

Bezalel Smotrich, who also heads civil affairs at the defense ministry, said his office had "completed its work and published a plan for the new Nahal Heletz settlement in Gush Etzion", a bloc of settlements south of Jerusalem.

All of Israel's settlements in the West Bank, occupied since 1967, are considered illegal under international law, regardless of whether they have Israeli planning permission.

"No anti-Israeli and anti-Zionist decision will stop the development of settlements," Smotrich, who lives in a settlement, posted on X.

"We will continue to fight against the dangerous project of creating a Palestinian state by creating facts on the ground."

The Israeli anti-settlement group Peace Now denounced the plan, calling it a "wholesale attack" on an area "renowned for its ancient terraces and sophisticated irrigation systems, evidence of thousands of years of human activity".

The approval also comes at a time of heightened tensions in the West Bank and east Jerusalem over the Israel-Hamas war in the Gaza Strip, which has been raging since October 7.

Over the years, dozens of unauthorized settlements have sprung up in the West Bank.

Excluding east Jerusalem, some 490,000 Israeli settlers now live in the territory, alongside some three million Palestinians.

Far-right parties in Israel's governing coalition have pressed for an acceleration of settlement expansion.

The new settlement was approved a day after National Security Minister Itamar Ben Gvir, another hardliner, drew global condemnation when he joined thousands of Jews to pray at the flashpoint Al-Aqsa mosque compound in annexed east Jerusalem, where Jewish prayer is banned.

The Nahal Heletz settlement, which received preliminary approval along with four others in June, lies between Gush Etzion and the Palestinian city of Bethlehem, south of Jerusalem.

Peace Now said it will flank houses in the Palestinian village of Battir, a world heritage site known for its stepped agricultural terraces, vineyards and olive groves.

"These actions are not only fragmenting Palestinian space and depriving large communities of their natural and cultural heritage, they also pose an imminent threat to an area considered to be of the highest cultural value to humanity," the organization said in a statement.

According to a European Union report, last year Israel advanced plans for 12,349 homes to be built in the West Bank, the most in 30 years.

Palestinians say the settlements represent the biggest threat to the two-state solution envisaging Israeli and Palestinian states existing side by side.

Violence in the West Bank has surged since the start of the Israel-Hamas war.

At least 625 Palestinians have been killed by Israeli troops and settlers in the West Bank since October 7, according to an AFP tally based on Palestinian health ministry figures.

At least 18 Israelis, including soldiers, have been killed by Palestinian attacks in the West Bank over the same period, according to official Israeli figures.