The E1 settlement project, frozen for decades due to international opposition, would connect Jerusalem to the Ma'ale Adumim settlement, making a future Palestinian capital in East Jerusalem virtually impossible and splitting the West Bank in half.
Smotrich announced pending approval of 3,401 new housing units Thursday at a press conference on the planned construction site.
"They will talk about a Palestinian dream, and we will continue to build a Jewish reality," Smotrich said.
"This reality is what will permanently bury the idea of a Palestinian state, because there is nothing to recognize and no one to recognize."
Final approval is expected next week. Smotrich has repeatedly lobbied Prime Minister Benjamin Netanyahu to annex the occupied West Bank.
The Palestinian National Council presidency condemned the plans as a "systemic plan to steal land, Judaize it, and impose biblical and Talmudic facts on the conflict." Speaker Rawhi Fattouh called it part of "creeping annexation" accompanied by settler violence against Palestinians.
Israeli settlements are considered illegal under international law. The first Trump administration reversed longstanding U.S. policy, ruling settlements were "not inconsistent" with international law. The Biden administration maintained this position.
Smotrich presented the plan as Israel's response to countries recently announcing intentions to recognize a Palestinian state.
Israeli watchdog Peace Now called the E1 advancement "deadly for the future of Israel and for any chance of achieving a peaceful two-state solution," warning the government is "driving us forward at full speed" toward an abyss.
The announcement follows Netanyahu's Tuesday interview statement that he was "very" attached to a Greater Israel vision, which supporters believe should include not only the occupied West Bank but parts of Arab countries.
The expansion comes amid increasingly difficult conditions for Palestinians in the West Bank, including increased settler attacks, evictions, and movement restrictions, while global attention focuses on Gaza.
More than 700,000 Israelis now live in the occupied West Bank and east Jerusalem, territories captured in 1967 and sought by Palestinians for a future state. The international community overwhelmingly considers Israeli settlement construction illegal and an obstacle to peace.
Israel's government is dominated by religious and ultranationalist politicians with settlement movement ties. Smotrich, a former settler leader, has cabinet-level authority over settlement policies and has vowed to double the West Bank settler population.
Israel captured the West Bank, east Jerusalem and Gaza Strip in the 1967 Mideast war. Palestinians claim all three territories for an independent state.
Israel annexed east Jerusalem and claims it as part of its capital, which lacks international recognition. It calls the West Bank disputed territory whose fate should be determined through negotiations, while Israel withdrew from Gaza in 2005.
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Source: BBC, CNN, Associated Press, The Guardian