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 gave final approval Wednesday for a controversial settlement project in the occupied West Bank that would effectively cut the territory in two, and that Palestinians and rights groups say could destroy hopes for a future Palestinian state.

Location of E1 is significant because it is one of the last geographical links between Bethlehem and Ramallah.