Ground has been broken in the West Bank for the first new Israeli settlement in two decades to compensate for an outpost demolished earlier this year, Prime Minister Benjamin Netanyahu said.
It comes as US President Donald Trump's Middle East envoy, as well as son-in-law and aide Jared Kushner, arrived in the region for talks with Israeli and Palestinian leaders.
Mr Netanyahu had vowed to build the settlement to replace Amona, a settlement outpost built on private Palestinian land that was dismantled in February following an Israeli Supreme Court ruling.
Pro-settlement hard-liners who dominate Mr Netanyahu's coalition and oppose Palestinian statehood on security or religious grounds had pressed him to keep that promise.
"Today work began in the field, as I promised, to establish a new community for the Amona settlers," Mr Netanyahu wrote on Twitter.
"After decades, I have the privilege to be the prime minister to build a new community," he said.
A picture posted with his announcement shows construction vehicles digging up ground.
היום החלו העבודות בשטח, כפי שהבטחתי, להקמת היישוב החדש למתיישבי עמונה. אחרי עשרות שנים, יש לי הזכות להיות רה״מ שבונה יישוב חדש ביו״ש pic.twitter.com/sNDKlDzaCu— Benjamin Netanyahu (@netanyahu) June 20, 2017
More than 600,000 Israelis now live in settlements in the West Bank and east Jerusalem.
Israel withdrew from the Gaza Strip in 2005 and the Islamic militant group Hamas took over the territory soon after.
But Israel has not built a fully fledged new settlement since the 1990s.
Instead, construction during that period has expanded existing settlements or taken place in unauthorised outposts such as Amona.
The Palestinians claim the territory captured by Israel from Jordan in the 1967 war for their future state, a demand that has wide international support.
In December, weeks before Mr Trump was inaugurated, then-president Barack Obama allowed the UN Security Council to pass a resolution that declared all settlements in both areas to be illegal.
Mr Trump condemned the decision at the time.
On the campaign trail, Mr Trump indicated he would be far more sympathetic to settlements than Mr Obama.
His platform made no mention of an independent Palestinian state, and his inner circle includes strong supporters of the settlement movement.
But since taking office, Mr Trump has appeared to change his position.
The Palestinians and the international community consider the settlements obstacles to Palestinian statehood.
Israel says the status of settlements as well as other core issues, such as security, should be resolved in peace talks.
US-mediated negotiations collapsed in 2014.
Mr Kushner will arrive on Wednesday for meetings in Jerusalem and Ramallah.
Jason Greenblatt, Mr Trump's international envoy, arrived on Monday.
Press secretary Sean Spicer said Mr Kushner and Mr Greenblatt will hear from Mr Netanyahu and Palestinian Authority president Mahmoud Abbas and other senior officials during the trip.