Netanyahu announced Tuesday on Twitter that "work began today on-site, as I promised, to establish the new settlement", including a picture of construction equipment breaking ground.
Benjamin Netanyahu said Tuesday he has the "privilege" of building the new settlement.
It is being built for the roughly 40 families evicted from the wildcat outpost of Amona earlier this year after Israel's high court ruled their homes had been built illegally on private Palestinian land.
According to Israeli rights group, Peace Now, the new settlement will be the first official one since 1991, correcting the year from 1992. During that period, however, the population of existing settlements and unauthorized so-called "wildcat outposts" has nearly trebled.
Since 1992, much of the controversy surrounding Israel's settlement construction in the occupied territories has revolved around expanding existing settlements. Most of the world considers settlements built on occupied land illegal under worldwide law, a position Israel disputes.
Construction begins just a day before a delegation of Trump Administration officials are headed to Israel and the West Bank to talk with officials in an attempt to kickstart the peace process.
Can the USA remain impartial?
Mladenov quoted Netanyahu as saying that "there will never be a government that is more pro-settlement than our government".
In Israel last month, Trump was silent on settlements, at least publicly.
Greenblatt is to be joined by Trump's son-in-law and adviser Jared Kushner on Wednesday.
Palestinian sources said that ahead of Kushner's meeting with Abbas, they had been asked to draw up a list of 12 "bullet point" demands they would want met in any negotiations. The Kushner family has also always been close to Netanyahu, with the prime minister once sleeping on Kushner's childhood bed.
Over 600,000 Israelis now live in settlements in the West Bank and east Jerusalem.
Regardless of whether a state chooses to support Israel or Palestine, "pitting the two sides against each other is only strengthening the terrorists", she said.
Israel argues most settlements would be included within Israel as part of any future peace deal in exchange for giving Palestinians land of equal quality and quantity.