The vote came as European nations voiced growing concern over settlement expansion in the occupied Palestinian territory, but with US President Donald Trump largely refraining from such criticism, which many Israelis see as a green light.
Israeli authorities have advanced plans for thousands of new settlement homes in recent months, although cabinet votes to authorise a pre-existing outpost are relatively rare.
Sunday’s vote to authorise the Havat Gilad outpost was unanimous, an official familiar with the proceedings said on condition of anonymity.
Speaking at the start of the meeting, Prime Minister Benjamin Netanyahu said “the government will today regularise the status of Havat Gilad to allow the continuance of normal life there”.
The official cabinet agenda said the motion would designate the 15-year-old outpost as a “new community” which will have the necessary building permits and a state budget.
The agenda said about 40 families live in the outpost, but envisages its enlargement.
Israeli media, however, said it was unclear how the authorisation would proceed, as parts of the outpost may have to be moved elsewhere if found to have been built on private Palestinian land.
Rabbi Raziel Shevach was shot dead near Havat Gilad, where he lived, on January 9.
The following week, Israeli troops searching for his attackers shot dead what they described as a Palestinian suspect in the city of Jenin in the northern West Bank, about 35 kilometres (22 miles) north of Havat Gilad.
However, they did not catch the man suspected of being responsible for Shevach’s killing, 22-year-old Ahmed Jarrar.
The manhunt continued on Saturday with a raid on the West Bank village of Burqin, near Nablus, sparking clashes during which soldiers shot dead a teenager identified by the Palestinian health ministry as Ahmad Abu Obeid, 19.
“Yesterday our forces were again in action in an effort to apprehend the last of the assassins and their accomplices in the murder of Rabbi Shevach,” Netanyahu told cabinet ministers and media.
“We will not rest until we bring them to justice. And we shall bring them all to justice.”
Roger Kuby, Shevach’s father-in-law, told AFP the government move was “a small consolation, but an important gesture”.
– ‘Revenge’ –
Mourners at Shevach’s funeral interrupted a speech by Education Minister Naftali Bennett of the far-right Jewish Home party with calls for “revenge”.
Bennett responded by saying that the only revenge should be in building more settlements, and Netanyahu said Sunday that was one of the planks of his policy.
“Anyone who thinks that through the abominable murder of a resident of Havat Gilad, a father of six, they would break our spirits and weaken us is making a bitter mistake,” he said.
Settlement watchdog Peace Now, however, said that retroactively granting legal status to Havat Gilad, built without development plans or construction permits, was “cynical exploitation” of Shevach’s death.
Israeli settlements are seen as illegal under international law and a major obstacle to peace as they are built on land the Palestinians see as part of their future state.
But Israel differentiates between settlements it has approved and those it has not.
Those without approval are referred to as outposts and tend to be populated by hardline religious nationalists who see the entire West Bank as part of Israel.
Past attempts by Israeli authorities to dismantle Havat Gilad have led to clashes with settlers there.
Israel has several times given retroactive approval to outposts, and last year work began on the first completely new government-sanctioned settlement built in the Palestinian territories in quarter of a century.
Israel faced sharp criticism from the administration of former US president Barack Obama over settlement construction, but that has not been the case with Trump’s White House. Israeli officials have sought to take advantage of this.
Trump’s declaration of Jerusalem as Israel’s capital on December 6 was also hailed by Israelis, while deeply angering the Palestinians who also see the city as their capital.
European officials and UN bodies have maintained their strong opposition to settlement building as well as the long-standing consensus that the status of Jerusalem must be negotiated.