Despite US pressure to halt settlement expansion, which Washington regards as an obstacle to peace with Palestinians, final approval was given to 818 units, while the others were in various stages of the process.
Jewish settler leadership praised the decision.
"I thank the Israeli government for the continued development of Israeli settlement," said Shlomo Ne'man, head of the West Bank Gush Etzion Regional Council and chairman of the Yesha Council.
"Especially in these difficult days, this is the most appropriate Zionist answer to all those who seek to destroy us."
Most countries consider the settlements, built on land captured by Israel in the 1967 Arab-Israeli war, to be illegal. Their presence is one of the fundamental issues in the Palestinian-Israeli conflict.
Israeli settlers claim Jewish historic connections to the land.
Tensions in the West Bank - in pictures
Peace talks that had been brokered by the US have been frozen since 2014.
The US is "deeply troubled" by the decision, State Department spokesman Matthew Miller said.
Mr Miller said that US officials had made clear, publicly and privately, to Israel their opposition to moves that advance settlements.
"The expansion of settlements undermines the geographic viability of a two-state solution, exacerbates tensions and further harms trust between the two parties," a US National Security Council spokesman said.
Since entering office in January, Prime Minister Benjamin Netanyahu's coalition has approved the promotion of more than 7,000 new housing units, most of them deep in the West Bank.
“The Israeli government is pushing us at an unprecedented pace towards the full annexation of the West Bank," the Israeli settlement watchdog Peace Now said.
A surge of violence over the past few weeks in the West Bank has included rampages by scores of Israeli settlers in Palestinian towns and villages, which drew international condemnation and concern from the White House.
The Israeli military said on Monday that an Israeli soldier was suspected "of taking part in a violent confrontation between Israelis and Palestinians" last week in the Palestinian town of Umm Safa.
"The soldier was apprehended and investigated by the Israel police," the military said.
Settler attacks in Palestinian towns and villages in the West Bank after the killing of four Israelis in a Hamas gun ambush have drawn international condemnation and US statements of concern.