The new government of technocrats is recognised by both the European Union and the United States but Israel has vowed to boycott what it says is a "government of terror" supported by its Islamist foe.
The tenders were unveiled by the Israeli housing ministry overnight, just 48 hours after the swearing in of the unity government ending seven years of rival administrations in the West Bank and Gaza.
The move drew a furious reaction from the Palestinians, who pledged to turn to the UN Security Council for an anti-settlement resolution for the first time in more than three years.
Of the 1,500 new homes, 400 will be in Israeli-annexed east Jerusalem and the rest in the occupied West Bank.
"I welcome the decision to give a fitting Zionist response to the establishment of the Palestinian government of terror," said Housing Minister Uri Ariel of the far-right Jewish Home party, describing the new homes as "just the beginning."
Hanan Ashrawi, a senior member of the Palestine Liberation Organisation (PLO), said the Palestinian leadership would seek UN intervention to bring Israel to account for the new settlement expansion drive.
"The executive committee of the PLO views this latest escalation with the utmost of seriousness and will counter it by addressing both the UN Security Council and the General Assembly as the proper way of curbing this grave violation and ensuring accountability," she said.
The last time the PLO sought a Security Council resolution against the settlements was in February 2011, but the move -- which was widely supported -- was blocked by a US veto.
Speaking to AFP on condition of anonymity, a senior official said the leadership was also considering an appeal to the international justice system.
"The Palestinian leadership is looking seriously into going to international courts against settlement activity," he said.
The option of legal action against Israeli settlement building at the International Criminal Court in The Hague opened up after the Palestinians won observer state status at the United Nations in 2012.
But they agreed to hold off on any such recourse for the duration of US-brokered peace negotiations with Israel, which collapsed earlier this year with Washington saying persistent settlement expansion played a major part.