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The BBC's Jon Donnison on the extent of Israeli construction work
Palestinian Authority President Mahmoud Abbas is to talk to Arab governments next week before deciding whether to continue talks with Israel.
His spokesman said there would be no official response yet to Israel's lifting of the ban on building in West Bank settlements.
Limited construction work began on Monday, with bulldozers clearing land on a handful of settlements.
The BBC's Wyre Davies in Jerusalem says peace negotiations are in the balance.
"Israel is ready to pursue continuous contacts in the coming days to find a way to continue peace talks between Israel and the Palestinian Authority," he said in a statement.
On Monday morning, Israeli media said bulldozers had started levelling ground for 50 homes in the settlement of Ariel in the northern West Bank.
Similar activity was also reported in the settlements of Adam and Oranit.
However, construction work was expected to be slow because of the Jewish holiday of Sukkot.
'Waste of time'The Palestinian leader, who was due to meet French President Nicolas Sarkozy on Monday, made no immediate comment on the end of the freeze.
His spokesman, Nabil Abu Rudeina, said there would be no official answer until the Palestinian leader had consulted other Arab leaders in Cairo on 4 October.
"During that day President Abbas will consult with the Arab governments and will come back to the Palestinian leadership to take the right decision and the right answer, with all what we have from the Americans and the Israelis," he said.
He added that there should be an immediate halt to settlement activity.
On Sunday, Mr Abbas warned that the peace talks renewed earlier this month would be a "waste of time" unless the ban continued.
If they see that the extent of construction in the West Bank has been limited, that might be enough to keep them at the table, our correspondent says.
In his statement, Mr Netanyahu made no direct mention of the issue of the settlement freeze.
But he maintained that it was possible "to achieve a historic framework accord within a year".
He had earlier urged settlers "to display restraint and responsibility".
Some Jewish settlers celebrated the end of the construction ban.
At the settlement of Revava, near the Palestinian town of Deir Itsia, they released balloons and broke ground for a new nursery school before the moratorium expired.
Earlier in the evening, a pregnant Israeli woman and her husband were slightly wounded in a gun attack in the West Bank.
Israeli police said Palestinian gunmen had opened fire on their car south of the city of Hebron. The woman later gave birth in hospital.
Compromise deal
Obstacles to peace
- Jerusalem
- Borders and settlements
- Refugees
- Water
Meanwhile, the US has renewed calls for Israel to maintain the construction freeze, saying its position on the issue remained unchanged and the US state department was staying "in close touch" with all parties.
US Secretary of State Hillary Clinton spoke to Mr Netanyahu and also to Tony Blair, the representative of the Middle East Quartet (the EU, Russia, the UN and US), as the end of the construction freeze neared, a spokesman said.
Israel says the settlements are no bar to continuing direct talks on key issues, and US negotiators have been working intensively to secure a deal.
Hamas, the Palestinian militant group that controls Gaza, is strongly opposed to the talks.
On Saturday, Israeli Defence Minister Ehud Barak told the BBC he would attempt to convince government colleagues of a compromise deal, and said the chances of a deal on the issue were "50/50".
It is estimated that about 2,000 housing units in the West Bank already have approval and settler leaders say they plan to resume construction as soon as possible.
The partial moratorium on new construction was agreed by Israel in November 2009 under pressure from Washington.
It banned construction in the West Bank, occupied by Israel since the Middle East war of 1967, but never applied to settlements in East Jerusalem.
US President Barack Obama has urged Israel to extend the moratorium, saying it "made a difference on the ground, and improved the atmosphere for talks".
Nearly half a million Jews live in more than 100 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem. They are held to be illegal under international law, although Israel disputes this.
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