"The group noted that, 'In the event that such a move for Havat Gilad is approved, the Government of Israel will be crossing another red line by legitimating land theft on a much larger scale than in previous cases".
The agenda said about 40 families live in the outpost, but envisages its enlargement.
"Today, the government will provide for the status of Gilad Farm in order to facilitate orderly life there".
Israel faced sharp criticism from the administration of former United States president Barack Obama over settlement construction, but that has not been the case with Donald Trump's White House and Israeli officials have sought to take advantage.
Most countries deem Israeli settlements in the West Bank, land Israel captured in a 1967 war that the Palestinians want for a future state, to be illegal.
Israeli forces have launched a number of violent raids in the area during the search for 22-year-old suspect Ahmed Jarrar, who remains at large.
Following the raid in Jenin, Defense Minister Avigdor Liberman said Israel's security establishment knows everything about the terrorist cell that carried out the attack and those who aided them.
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Those without approval are referred to as outposts and are typically populated by hardline religious nationalists who see the entire West Bank as part of Israel.
In nine years with Netanyahu as the head of government, the cabinet has voted only once to convert unapproved outposts into officially recognized settlements, according to the Jerusalem Post.
Past attempts by Israeli authorities to dismantle Havat Gilad have led to clashes with settlers there.
"When Lieberman talks about "legalizing" Havat Gilad, he is actually saying that it is permissible to steal, as long as the victim is a Palestinian", Meretz chairwoman Zehava Galon tweeted.
Eight required hospitalization, the Red Crescent said. Knesset speaker Yuli Edelstein called it "a victory over terror".
Roberto Valent, an official with the United Nations humanitarian agency OCHA, said he was "deeply concerned" by the demolition.