Binyamin Netanyahu ordered the ministry to immediately halt plans to issue tenders to build 1,200 housing units in the area, Haaretz and Ynetnews.com reported.
The Housing Ministry had issued a tender to hire an architect to plan the construction of the units in the E1 area as well as an additional 20,000 housing units in West Bank settlements at a cost of $13 million, Haaretz said.
Explaining the prime minister's decision, Netanyahu's office issued a statement saying "there is no need to pay international prices for a process that does not have great significance," Ynetnews.com said.
Netanyahu's decision only referred to the E1 area and not other West Bank housing units.
In 2012, after the United Nations upgraded the Palestinian Authority's status to that of non-member observer state, Israel approved plans to construct housing units at the E1 site. An order was later issued to suspend the construction, but the housing ministry moved ahead with plans to hire an architect the newspaper said.
Peace Now an organization that monitors West Bank settlement activity, said the government intends to fill the West Bank with settlements to foil all chances of peace with the Palestinians. "The peace talks are just for show. Behind the scenes, the government is planning to ruin the prospects of two states and fill the territories with new settlements. Issuing tenders is clear evidence of Netanyahu's intention to foil the [peace] agreement."