The United States on Thursday condemned Israel's approval of a settlement on a UNESCO World Heritage Site near Bethlehem, pointing to its harm to prospects for a Palestinian state.

Far-right minister Bezalel Smotrich announced the move on Wednesday, openly saying that Israel hoped to create new "facts on the ground" to prevent the creation of a Palestinian state.

"Every single one of these new settlements would impede Palestinian economic development and freedom of movement and undermine the feasibility of a two-state solution," State Department spokesman Vedant Patel told reporters.

"We find that to be inconsistent with international law, and we certainly oppose the advancement of settlements in the West Bank," he said.

The United States has stepped up criticism of Smotrich and Itamar Ben Gvir, far-right members of Israeli Prime Minister Benjamin Netanyahu's government who oppose a plan by President Joe Biden aimed at ending the 10-month Gaza war.

All of Israel's settlements in the West Bank, occupied since 1967, are considered illegal under international law.

The Biden administration has repeatedly criticized the expansion of settlements, including before the Gaza war, although it has not taken direct retaliatory measures against its close ally.

The previous administration of Donald Trump broke with US precedent by saying that it did not see the settlements as illegal.