In a move likely to exacerbate tensions as Israeli and Palestinian negotiators seek to resolve the decades-long conflict, the city said it had granted private contractors permits to build 386 units in Har Homa, 136 units in Neve Yaakov and 36 units in Pisgat Zeev.
Issuing permits is one of the last stages before construction begins, with building likely to start in the coming weeks, Israel's Peace Now settlement watchdog said.
"We are talking about building permits, which is really the final stage," spokesman Lior Amihai told AFP.
Israel and the Palestinians resumed direct peace negotiations at the end of July with the aim of reaching an agreement within nine months.
But the US-led talks have been overshadowed by Israel's refusal to rein in construction plans on land the Palestinians want for a future state.
Senior Palestinian official Hanan Ashrawi condemned Israeli building policy in east Jerusalem.
"Israel is engaging in the deliberate provocation of the Palestinians to drive them to leave the negotiations in protest of Israeli violations, and therefore should be blamed for the destruction of the peace process," she said in a statement.
In the same period, tenders were issued for 4,460 new homes -- 2,372 in the West Bank and 2,088 in east Jerusalem.
Figures for the whole of 2013 show that 2,433 new east Jerusalem homes were pushed through various stages of the lengthy planning process -- indicating that almost all of them were advanced after the talks started.
Israel captured east Jerusalem during the 1967 Six-Day War and later annexed it in a move never recognised by the international community.
But the Palestinians want east Jerusalem for the capital of their promised state. They, along with the international community, consider settlement construction there as well as in the West Bank a violation of international law.
