The order was signed by Israel's COGAT head Yoav Mordechai, a government body which oversees civilian affairs in the occupied West Bank, and will apportion state-owned land near the illegal Shilo settlement for construction, Israeli news site Ynet reported.
The approval comes two months after Israel's security cabinet unanimously voted to establish a new settlement near Nablus to compensate hard-line settlers from the Amona outpost, which was razed in February in accordance with an Israeli High Court order.
It is the first concrete step in advancing the new settlement of Amichai, although the settlement still requires a military order before temporary construction can begin.
"Unfortunately, it is still too early to be happy," Amona settler leader Avichai Boaron told Ynet.
"We are calling on the prime minister to honour himself and us and allow us to establish a new community as he promised."
Israel's High Planning Committee was scheduled to meet earlier in May to discuss the settlement plans, but the meeting was delayed to avoid any potential disputes during US President Donald Trump's visit to Israel.
The new Israeli settlement will be the first to be constructed in the occupied West Bank since the signing of the Oslo Accords in 1993 and sparked outrage from Palestinian officials and the international community when announced in March.
"Israel is more committed to appeasing its illegal settler population than to abiding by the requirements for stability and a just peace," senior PLO official Hanan Ashrawi said at the time.
A spokesman for UN chief Antonio Guterres expressed "disappointment and alarm" at the move, while the EU said further settlement building will "undermine prospects for a viable two-state solution."
Israel's current cabinet is considered the most right-wing in history, with the settler movement and its supporters exerting considerable influence over decision making.
The decision to evacuate the illegal Amona outpost had threatened to tear apart Netanyahu's coalition government.
The international community regards all Israeli settlements in the occupied Palestinian territories as illegal under international law and a major obstacle to Middle East peace.
Some 500,000 Jewish settlers live in more than 196 settlements in the occupied West Bank and East Jerusalem.
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