The agreement was part of the 'roadmap for peace' drawn up by the Mideast Quartet of mediators - the United Nations, the European Union, the United States and Russia - to secure a two-state solution to the Israeli-Palestinian conflict.
Israeli media said the tender for Ariel, a large West Bank settlement, and the smaller region of Elkana, could be part of the government's deal with residents of illegal settlements, which must be demolished under the roadmap.
The authorities have recently pulled down two such settlements, with only a few dozen inhabitants.
Israel has pledged not to build new settlements on the West Bank and not to annex Palestinian lands.
However, despite protests from Palestinians and the international community, Israel has been reluctant to freeze construction within the existing settlements, especially in areas it plans to retain after reaching a settlement with Palestinian authorities.
Israeli army spokesman Peter Lerner said on Friday that Israel has also allowed Palestinians to set up 20 police outposts in the West Bank.
He said outposts for around 500 Palestinian police personnel would be built in the so-called Zone B, controlled jointly by Israelis and Palestinians.
Palestinian police have not had their own outposts there for eight years. "They functioned before 2000, but were closed down after the intifada began," Lerner said.
Palestinian law enforcers will soon hold consultations with Israeli military personnel to coordinate rules of cooperation in areas where the conflicting parties share control.
Last November's U.S.-hosted Mideast summit saw a resumption of talks between the Palestinian National Authority and Israel after a seven-year hiatus. The sides pledged to do everything possible to draft a peace settlement by the end of 2008, as well as to come to an agreement on the form of a future independent Palestinian state.
However, the talks came to a halt last month following a devastating Israeli offensive on the Gaza Strip which left 120 Palestinians dead.
