Washington said it was "deeply concerned" by the announcement, with a senior US official slamming the "pervasive advancement of settlement activity in a new and potentially unlimited way".
The approvals mostly involved new housing units, but a retroactive green light was also granted to 179 existing homes in the Ofarim settlement.
Around 50 new units received final approval, while others were given preliminary authorisation at different stages in the review process.
Nickolay Mladenov, the United Nations coordinator for the Middle East peace process, told the UN Security Council on Monday that Israeli settlement expansion had surged in the past two months since a key report called for a halt.
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The report by the diplomatic Quartet - the European Union, Russia, the UN and the United States - said construction of settlements on land earmarked to be part of a future Palestinian state is eroding the possibility of a two-state solution.
The Palestinians see east Jerusalem, occupied by Israel in 1967 and later annexed, as the capital of their future state. Israel sees all of Jerusalem as its capital.
"The claim that it is illegal for Jews to build in Jerusalem is as absurd as saying Americans can't build in Washington or the French can't build in Paris," Netanyahu spokesman David Keyes said in response to Mladenov's comments.
The United States, has long been concerned that Israel's building on occupied Palestinian land is undermining hopes for a Middle East peace deal.
"This significant expansion of the settlement enterprise poses a very serious and growing threat to the viability of the two-state solution," he said on condition of anonymity.