Israel has given final approval for a controversial settlement project that could cut the occupied West Bank effectively in two.

The long-stalled project near Jerusalem, known as E1, further fragments lands envisioned as a Palestinian state, advancing a goal of Israeli hard-liners.

Israel has approved a long-delayed settlement project that would build 3,400 housing units for Jews in the West Bank, in a move that both its backers and its many critics say would undercut Palestinian ambitions to control the region.