* West Bank settlement plans coincide with prisoner release
* Peace talks resumed on July 30 after three years
* Palestinians condemn new housing but negotiations on track
* First Palestinian prisoners due to be released on Tuesday
By Jeffrey Heller
JERUSALEM, Aug 11 (Reuters) - Israel said on Sunday it was marketing nearly 1,200 new homes for Jewish settlers in the occupied West Bank, just two days before a planned release of long-serving Palestinian prisoners.
Israel has made a major push on settlements since the resumption on July 30, after a three-year break, of U.S.-brokered talks on Palestinian statehood.
Israeli media, in unconfirmed reports, have suggested Sunday's housing plans were disclosed to Washington in advance and had been aimed partly at overcoming opposition within the pro-settlement cabinet to the prisoner releases.
"I saw that important newspapers reported this morning that there is purportedly some kind of coordination regarding the construction," Housing Minister Uri Ariel, a member of the ultranationalist Jewish Home party, said on Army Radio.
"I very much believe the newspapers and the media but I don't know whether I can authenticate this," he said, calling the "release of terrorists" unjust.
Israel's Housing Ministry said on its website that tenders were issued for 793 new apartments in areas of the West Bank that Israel annexed after capturing the territory and the eastern part of Jerusalem in the 1967 Middle East war.
Plots for 394 more units were being sold in the West Bank settlements of Ariel, Efrat, Maale Adumim and Betar, it said.
While condemning settlement expansion, Palestinians have stopped short of threatening outright to abandon the peace negotiations, which are due to go into a second round on Wednesday in Jerusalem after a session in Washington.
"The international community must stand with this peace process and must stand shoulder to shoulder with us and hold Israel accountable for its continuing settlement activities," Palestinian chief negotiator Saeb Erekat told Reuters.
"Continuing settlement activity means dictations not negotiations," he said.
Israel is expected to free a first group of 26 Palestinian prisoners on Tuesday out of a total of 104 Arab inmates whose release was approved last month to help restart the talks.
Palestinian President Mahmoud Abbas had demanded the release of prisoners held since before a 1993 interim peace accord took effect. Israel has jailed thousands more Palestinians since then, many for carrying out deadly attacks.
An Israeli cabinet committee was to convene later on Sunday to finalise a list of prisoners for the first release, as families of those killed in Palestinian attacks appealed against the move. The High Court usually opts not to intervene.
Separately, Israel's military-run Civil Administration in the West Bank gave preliminary approval on Thursday for the construction of more than 800 new homes for settlers, but said it needed government approval before building could begin.
Israel insists it would keep major West Bank settlement blocs, which are mainly situated close to the Israeli border, under any peace accord with the Palestinians. Most world powers regard all the settlements as illegal and Palestinians say the enclaves could deny them a viable and contiguous state.
Some 500,000 Israeli settlers live in the West Bank and East Jerusalem amid 2.5 million Palestinians. Israel withdrew in 2005 from the Gaza Strip, which is now governed by Hamas Islamists opposed to permanent co-existence with the Jewish state.
A week ago, the Israeli government put 91 settlements on a national priority funding list, adding six to a roster of dozens of enclaves already eligible for state subsidies.
Last month, while U.S. Secretary of State John Kerry was on a peace-brokering visit to the region, the Civil Administration granted initial approval for construction of 732 new homes in Modiin Ilit, a settlement midway between Jerusalem and Tel Aviv. (Editing by Louise Ireland)