Israeli legislators have voted against a bill to retroactively legalise settler homes built on private Palestinian land, in a move which has sharply divided Prime Minister Binyamin Netanyahu's ruling coalition.
The bill was an attempt to circumvent a Supreme Court ruling ordering the removal of five buildings from a settlement outpost known as the Ulpana neighbourhood by July 1.
The planned demolition, which would affect 142 people, has sparked fury among settlers and their supporters in parliament, with right-wing parliamentarians set to bring the two bills for debate and a vote in a Knesset session later on Wednesday.
The legislation would essentially have legalised the outpost in the eyes of the Israelis and offered compensation to the Palestinian landowners.
Israel differentiates between "legal" settlements and "illegal" outposts, but the international community views all settlements on occupied territory as a violation of international law.
Netanyahu strongly opposes the bill on the grounds it would create an international backlash, and has reportedly threatened to sack any cabinet minister or deputy who backs the proposed legislation.
He has said he backs the idea of physically relocating the five buildings, moving them stone by stone to a new location, in a plan which is being examined by Attorney General Yehuda Weinstein.
Despite a commanding majority of 94 within the 120-seat coalition, Netanyahu has struggled to rein in the far-right members of his ruling right-wing Likud party, many of whom have said they will back the move to legalise the Ulpana homes.
At least two ministers have said they will back the bill - Yuli Edelstein, a Likud minister who holds the public diplomacy portfolio, and Science Minister Daniel Hershkowitz, who heads the Jewish Home party.
But after some hesitation, Foreign Minister Avigdor Lieberman, who heads the ultra-nationalist Yisrael Beitenu faction, said he and his party of 15 seats would vote against, a statement said.
Meanwhile, hundreds of settlers began the last leg of a three-day march to Jerusalem in support of the bill.
The march began on Monday morning outside the condemned buildings, which lie on the outskirts of the Beit El settlement near Ramallah.
Negotiations between Israel and the Palestinians broke down three years ago, and the Palestinians refuse to restart negotiations until Israel freezes settlement construction in the occupied West Bank and East Jerusalem.
The Palestinians claim both areas, captured by Israel in the 1967 Middle East war, for a future state.
Netanyahu says talks should resume without any preconditions and has refused calls for a full settlement freeze.
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