The plan, approved by the committee late Monday, allows for the immediate construction of 930 apartments and 300 at a later date, The Jerusalem Post said Tuesday.
Gilo is outside the 1967 Green Line marking the area between Israel and the Palestinian Territories, land captured by Israel in the 1967 Six Days War, and includes the West Bank, Golan Heights and Gaza Strip.
Despite coming under harsh international condemnation for the construction of new housing units in recent weeks, Israel has decided to press ahead with the plans.
The latest step brings the number of housing units in various stages of approval to more than 6,000 units.
On Dec. 18, The Jerusalem District Building and Planning Committee gave preliminary approval to build 1,500 housing units in the East Jerusalem neighborhood of Ramat Shlomo and was expected to approve stages B and C for the construction of 1,363 housing units at Givat Hamatos, a Jewish neighborhood near Beit Safafa in East Jerusalem, and then approve stage A, which calls for the building 2,610 units in the neighborhood. At the time, Israeli officials told the Hebrew language daily Ma'ariv half of the planned units are for Arab families in Beit Safafa.