Israel has taken their settlement expansion to the skies with the approval of a controversial plan to install a cable-car over occupied East Jerusalem.

The signed off plan will see a former railway station in West Jerusalem linked by cable car to the Old City in occupied East Jerusalem. It would stop at the Dung Gate entrance to the Old City near the Western Wall, traversing about 1.4km.

The plans have angered the Palestinian and international community, who regard the act as provocative due to the highly sensitive nature of Jerusalem in the Israeli-Palestinian conflict.

East Jerusalem was occupied by Israel in 1967 and later annexed in a move never recognised or legitimised by the international community. Palestinians presume it to be the capital of their future state, while Israel sees all of Jerusalem as its undivided capital.

However, despite international calls to cease all settlement activities and other projects on the annexed land, Israel are expected to have the cable-car up and running by 2020.

The first phase of the cable car plan was agreed upon at an equally controversial meeting held at the Western Wall in Jerusalem. The gathering marked the 50th anniversary of Israel's annexation of East Jerusalem, and was met with fierce backlash from Palestinian leaders.

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"Today's meeting in occupied East Jerusalem is an attempt by the Israeli government to normalise occupation, oppression and colonisation over the land and people of Palestine," Palestinian negotiator Saeb Erekat said in a statement.