Defense Minister Ehud Barak last week authorized construction of a dormitory at a religious school in the Beit Romano neighborhood of Hebron.
The yeshiva was surprised to learn it had gained approval, having only heard of it after a Haaretz inquiry on the matter.
The yeshiva said construction had been delayed for years due to a defense ministry ban.
The interim head of the yeshiva, Rabbi Hananel Etrog, said Barak's predecessor, MK Amir Peretz, had refused to approve the request. "We've been working on this for years," said Etrog.
The Beit Romano neighborhood was built in the 1980s and is home to the Shavei Hebron yeshiva and its 250 students.
The area was returned to Jewish control after six Israelis were killed near the Beit Hadassah stronghold in 1981.
As part of the construction project, a multi-storied structure will be added to the existing building to serve as a residence hall for students.
Planning for the yeshiva's construction began in the 1990s, but has undergone multiple changes due to requirements for various permits and defense ministry approval.
The approval runs contrary to a recent Israeli promise to the U.S. that it would freeze construction in existing settlements.
Secretary of State Condoleezza Rice said during her visit to the region in March that she warned Israel to cease construction as it would harm the peace process.
Hebron, which has been the site of multiple clashes between settlers and Palestinians, is considered a particularly contentious site in the West Bank.
The defense ministry said that approval had been given "for expansion and not for new construction. All authorizations are given legally and according to procedure."
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