Netanyahu had vowed to build the settlement to replace Amona, a settlement outpost built on private Palestinian land that was dismantled in February following an Israeli Supreme Court ruling.
Pro-settlement hard-liners who dominate Netanyahu’s coalition and oppose Palestinian statehood on security or religious grounds had pressed him to keep that promise.
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“Today work began in the field, as I promised, to establish a new community for the Amona settlers,” Netanyahu wrote on Twitter.
“After decades, I have the privilege to be the prime minister to build a new community,” he said.
A picture posted with his announcement shows construction vehicles digging up ground.
Over 600,000 Israelis now live in settlements in the West Bank and east Jerusalem. Israel withdrew from the Gaza Strip in 2005 and the Palestinian resistance group Hamas took over the territory soon after.
But Israel has not built a fully-fledged new settlement since the 1990s. Instead, construction during that period has expanded existing settlements or taken place in unauthorised outposts like Amona.