An Israeli Interior Ministry spokeswoman said a planning committee had approved two building projects in Pisgat Zeev and Har Homa. The two neighborhoods are located beyond the 1967 borders.
The spokeswoman did not say when construction was expected to start.
Saeb Erekat, a senior aide to Palestinian President Mahmoud Abbas, said the Israeli move further hampered US efforts to revive Israeli-Palestinian peace talks, which collapsed last year shortly after they began because of settlement building.
"When the whole world and US President Barack Obama are working to revive the negotiations and the peace process, the Israeli government is determined to undermine and sabotage these efforts," Erekat said.
Netanyahu is due to hold talks with Obama on Friday in what could be a tense meeting after the American leader on Thursday endorsed a longstanding Palestinian demand that the borders of any future state should be based on 1967 lines.
Netanyahu, who has had strained relations with Obama, headed for Washington saying the president's vision of a Palestinian state along these borders could leave Israel "indefensible".
What about peace talks?
Obama's emphasis on 1967 borders went further than before in offering principles for resolving the stalemate between Israel and the Palestinians. But he stopped short of presenting a formal US peace plan or suggesting how talks should resume.
Abbas welcomed Obama's efforts to renew negotiations, and had made plans to convene an "emergency" session of Palestinian and Arab officials to weigh further steps, a senior aide said.
But Abbas did not comment on Obama's firm rejection of a Palestinian drive to seek recognition of their statehood at the United Nations in September at the annual meeting of the UN General Assembly.
Peace talks between Israel and the Palestinians, brokered by Washington, collapsed last year after Netanyahu refused to extend a moratorium on Jewish settlement-building in the West Bank and Abbas refused to carry on negotiations.
Israel angered Washington in March 2010 when an announcement of plans to build hundreds of housing units in a settlement was made during a visit by US Vice President Joe Biden.
Palestinians say settlement plans are regularly unveiled when senior Israeli politicians are due to meet their US counterparts.
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