Palestinians have said any further settlement expansion could scuttle the negotiations, which resumed in July after intensive shuttle diplomacy by U.S. Secretary of State John Kerry. Talks ran aground in 2010 over the same issue.
But Prime Minister Benjamin Netanyahu has continued to pledge more settlement building, often timing the announcement of these plans to offset the anger of far-right political partners at Israel's release of Palestinians jailed for deadly attacks.
"Israel will declare new building in the settlements next week," the official said, speaking on condition of anonymity. He would not say how many units were planned or where.
Israeli Defence Minister Moshe Ya'alon hinted at new settlement plans as well during a visit to a military base where he told reporters:
"I think it is our right to build, certainly according to our understandings and agreements with the Americans. And in accordance with that, we shall continue to build."
Israel has said it will free two dozen Palestinian prisoners on December 29, the third batch of inmates released since August.
In all, 104 long-serving Palestinian inmates will go free, once a fourth group of prisoners is released at a later time.
Palestinian negotiator Saeb Erekat told reporters on December 18 that the peace talks would definitely fail if Israel continued to expand its settlements on land seized in a 1967 war. He said that since negotiations started in July, Israel had announced plans to build some 5,992 new housing units.
The negotiations have made no clear signs of progress on core conflict issues, but Kerry has expressed hopes of achieving a deal by April. Erekat said he thought it would take a year to draft any agreement.
Netanyahu said in a speech a week ago he could not promise a deal would be achieved, adding "it doesn't only depend on us."
The peace talks have also been dogged by a rise in violence in the past few months, with at least 19 Palestinians and four Israelis killed in occupied territory since the negotiations began.
In the latest incidents, a Gaza sniper shot dead an Israeli civilian contractor repairing a border fence on Tuesday, and Israel retaliated with air strikes on Hamas targets in Gaza, one of which killed a three-year-old Palestinian girl.
(Writing by Allyn Fisher-Ilan; Editing by Hugh Lawson)
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