The United Nations Special Coordinator for the Middle East Peace Process, Robert Serry, also condemned the decision.
"Today’s announcement by Israel to approve a large number of new units deep inside the occupied Palestinian territory in the settlement of Shilo and retroactively legitimize hundreds in a nearby outpost is deplorable and moves us further away from the goal of a two-state solution," a statement said.
The spokesperson for EU foreign policy chief Catherine Ashton said that she is "deeply concerned by the approval on 22 February by the Israeli Civil Administration of new construction in the settlements of Shvut Rachel and Shilo as well as the retrospective approval granted for housing units already built."
The EU chief's spokesperson urged Israel to reverse its decision.
The issue of Israeli settlements is one of the major obstacles to peace negotiations and the implementation of a two state solution.
All settlements built on occupied territory are illegal under international law.
Some 500,000 Jewish settlers live in the West Bank and East Jerusalem. There are about 2.5 million Palestinians in the same territory.
