The bill, which attempted evade a High Court ruling ordering the eviction of five homes in Beit El's Ulpana neighborhood, was voted down 69:22.
Wednesday evening saw Netanyahu and Housing and Construction Minister Ariel Atias greenlight 851 new housing units – 300 for Beit El and 551 for four other settlements.
The two agreed to immediately issue the construction tenders. Sources privy to the details said that "The obstacles have been removed and we're looking at where more construction can be approved."
The vote (Photo: Gil Yohanan)
The settlements most likely to get new housing units at this time are Efrat, Gush Etzion and Karnei Shomron.
The prime minister held a special press conference on Wednesday evening, during which he defended the Knesset's decision: "Passing this bill would have hurt Beit El… Those who think the legal system was used to ram the settlement movement are wrong. Beit El is not getting smaller – it's getting bigger. Beit El will be expanded," he said.
Efrat Regional Council Head Oded Revivi told Ynet that he had been "Contacted by two ministers who informed me that 400 housing units will be approved by the end of the week.
"I regret that in order to get this permit another neighborhood had to be razed. I hope that the permits are given and that we end up remembering this day as one when the settlement was reinforced," Revivi said.
'Decision undermines peace efforts'
The Palestinian Authority condemned the decision: Palestinian President Mahmoud Abbas' spokesman Nabil Abu Rudeineh said that the decision was "sabotaging the peace efforts.
"The Israeli government is taunting the Palestinian people, its leadership, the Arab nation and international law," he said.
Construction in east Jerusalem (Archives: AFP)
Washington also expressed its disapproval of the move. A State Department official said that the US was aware of both the vote and the subsequent decision to approve new construction, adding that "Continued Israeli settlement activity in the West Bank undermines the peace efforts and contradicts Israeli commitments and obligations including the 2003 Road Map.
"The US position on Israeli settlements is clear – we do not accept the legitimacy of continued Israeli settlement activity. We also oppose any effort to legalize settlement outposts," the official said.
Meanwhile, military and civilian legalists, aided by international law experts, continued deliberations over the relocation of the five disputed homes in Ulpana.
According to Netanyahu's proposed solution, the five disputed houses are to be moved several hundred yards away, to a military zone within Beit El.
Attorney General Yehuda Weinstein has issued an opinion that the proposal would not set a legal precedent, but legal experts told Ynet that the issue of relocating civilian structures onto a military area was problematic.
"International law presents several problems regarding the creation of a de facto civilian enclave in the middle of a military zone in the West Bank," a legal source told Ynet, adding that the proposed "rezoning" was a complex issue.
Netanyahu and Weinstein are expected to meet on Thursday to deliberate the matter further.
Elior Levy, Aviad Glickman and Yitzhak Benhorin, in Washington, contributed to this report
- Receive Ynetnews updates
directly to your desktop