The Construction Ministry's proposed budget for 2008 includes 500 apartments for the Har Homa neighbourhood in the area.
Plans to build 340 apartments in that same neighbourhood, announced earlier this month, upset the first round of peace negotiations between Palestinians and Israel.
An additional 240 apartments are planned for construction in Maaleh Adumim outside Occupied Jerusalem, one of Israel's biggest settlements, according to the ministry.
Cabinet Minister for Jerusalem Affairs Rafi Eitan told Army Radio that Israel never promised to halt construction within the municipal borders of Occupied Jerusalem.
Güncelleme Tarihi: 23 Aralık 2007, 11:57
"Har Homa is an integral, organic part of Jerusalem. .... No promise was ever given to anyone that we wouldn't continue to build in Har Homa, because it's within the municipal borders of Jerusalem," he said.