Israel has approved hundreds of new settlement homes in occupied East Jerusalem, after the staunch pro-Israel US President Donald Trump took office.
Jerusalem Deputy Mayor Meir Turgeman told AFP: "Now we can finally build."
Israel's PM reportedly delayed approval given the opposition of Barack Obama, who infuriated Israel by allowing a UN resolution against settlements to pass.
Settlements in East Jerusalem are considered illegal under international law, though Israel disputes this.
Israeli Prime Minister Benjamin Netanyahu said on Sunday that Mr Trump had invited him to a meeting in Washington in February, on a date yet to be decided.
A statement said the two leaders held a "very warm" telephone conversation in which they discussed issues including the Iran nuclear deal and the peace process with the Palestinians.
The White House said Mr Trump had emphasised during the call that peace between Israel and the Palestinians "could only be negotiated directly between the two parties".
It said the two leaders had agreed to continue to consult closely on regional issues including "threats posed by Iran".
What has Israel approved and why now?
Jerusalem's City Hall approved construction permits for 566 new homes in the East Jerusalem settlements of Pisgat Zeev, Ramat Shlomo and Ramot.
Mr Turgeman said: "I was told to wait until Trump takes office because he has no problem with building in Jerusalem.
"The rules of the game have changed with Donald Trump's arrival as president. We no longer have our hands tied as in the time of Barack Obama."
He said the delay was at the request of Mr Netanyahu in the wake of the 23 December UN Security Council resolution opposing Israeli settlement construction.
The US refusal to veto the resolution marked the lowest ebb of deteriorating relations between the Obama administration and the Israeli government.
Mr Obama regarded opposing new settlement homes as a key plank in pursuing a possible "two-state solution" to ending the decades-old conflict between Israelis and Palestinians.
What are settlements and why is the approval controversial?
Settlements are communities established by Israel on land occupied in the 1967 Middle East war. This includes the West Bank, East Jerusalem and the Golan Heights.
More than 500,000 Jews live in about 140 settlements built since the occupation.
The issue has long been a major source of dispute between Israel and most of the international community, including the US.
The latest UN Security Council resolution stated that the establishment of settlements "has no legal validity and constitutes a flagrant violation under international law and a major obstacle to the achievement of the two-state solution and a just, lasting and comprehensive peace".
The resolution infuriated the Israeli government, particularly concerning East Jerusalem. Israel sees the whole of Jerusalem as its capital. The Palestinians want East Jerusalem as the capital of their future state.
Negotiations between Israel and the Palestinians broke down in 2014.
A summit aimed at kick-starting peace talks was held in Paris last Sunday but neither side was invited to participate. It restated the desire for a two-state solution.
So why approve now?
In two words, Donald Trump. His presidential election campaign carried a message of strong Israeli support.
He said he was "Israel's best friend".
He also said he would move the US embassy from Tel Aviv to Jerusalem, although the US does not recognise Jerusalem as Israel's capital.
On Sunday, White House spokesman Sean Spicer said in a statement: "We are at the very beginning stages of even discussing this subject."
After the UN resolution, Mr Trump tweeted in support of Israel, saying he would not allow it to be treated with "disdain and disrespect".
He urged Israel to "stay strong" until he assumed office the following month.
He has also appointed right-winger David Friedman as his ambassador to Israel. Mr Friedman is strongly critical of the two-state solution and supports Jewish settlement building.
What have the Palestinians said?
The initial response came from Nabil Abu Rdainah, a spokesman for Palestinian President Mahmoud Abbas.
"We strongly condemn the Israeli decision to approve the construction," he said.
So what happens next?
Israeli right-wing politicians may see a chance to push forward with much wider settlement programmes.
Two key areas would be the Maale Adumim settlement, east of Jerusalem.
It has been seen as a key part in any two-state solution, and an annexation would cast huge doubts on achieving that.
The E1 district, between Maale Adumim and East Jerusalem, is another key area.
What is the two-state solution?
A "two-state solution" to the decades-old conflict between Israelis and Palestinians is the declared goal of their leaders and many international diplomats and politicians.
It is the shorthand for a final settlement that would see the creation of an independent state of Palestine within pre-1967 ceasefire lines in the West Bank, Gaza Strip and East Jerusalem, living peacefully alongside Israel.
The United Nations, the Arab League, the European Union, Russia and the United States routinely restate their commitment to the concept.