Media reports that Israel has approved the massive expansion of the West Bank settlement of Efrat represent the first lesson for the Obama administration as to why it must establish a policy of zero tolerance for settlement expansion before it is too late.

The reports themselves are equal parts truth and hyperbole. So first, here are the facts: Earlier this month, a military appeals committee - the legal entity before which it is possible to appeal decisions made by the Custodian of State-Owned and Abandoned Property in Judea and Samaria - approved an August 2004 decision to declare a large tract of land (around 330 acres) previously considered part of Bethlehem and the village of Artas to be "state land," rejecting objections filed by Palestinian landowners against the confiscation. The land in question is on a hill the settlers call "Givat Eitam" (Eitam Hill), near the settlement of Efrat, located south of Bethlehem. Efrat residents have long wanted to expand construction into this area.

The declaration was based on an 1858 Ottoman law, by which the sultan could take over land that had not been cultivated for three consecutive years. Since 1967, Israel has used this law to take control of around 16 percent of the West Bank, virtually all of which has been turned over to Jewish settlers.

Despite the fact that up until a couple of weeks ago Givat Eitam was not officially considered state land, the area is included inside the official municipal boundaries of Efrat - borders that were set in 1999, well before Israel began trying to officially seize the land. A plan exists to build some 2,500 housing units on the site, doubling the size of the settlement (which currently numbers some 8,000 residents). Settlers are putting pressure on the government to allow the construction to proceed. Reclassifying the site as state land is a concrete step toward making this happen.

That's the bad news. The good news is that the Givat Eitam plan is still a long way from actually being implemented, for two reasons.

First, Givat Eitam is on the Palestinian side of the separation fence. Expansion of Efrat to the site will be problematic unless the fence is re-routed - something that will be difficult given the Israeli Supreme Court's previous ruling that the barrier cannot be gerrymandered to accommodate settlement expansion plans.

Second, before any construction can start there must be a detailed plan, subject to extensive approval requirements by planning authorities, with each step along the way requiring the approval of the defense minister as well. Clearly, the plan can easily be stopped, if the Israeli government is inclined to do so.

So the formal reclassification of the site as state land does not mean that next week or next month bulldozers will begin work there. Does this mean that the world - and particularly the Obama administration - shouldn't worry about the Efrat plan? Absolutely not.

The new government in Washington should learn from this experience, to the extent which the mere news of settlement expansion - even construction in the very early planning stages - can seize the world's attention and has the potential to torpedo everything the administration might be trying to achieve on the Israeli-Palestinian track and in the region.

If President Barack Obama is serious about making progress toward Israeli-Palestinian peace and about setting America's relationship with the Arab and Muslim worlds on a new and better course, he cannot allow settlements to hijack the agenda.

There are literally hundreds of Givat Eitam-type plans for settlements throughout the West Bank and in East Jerusalem sitting on the desks of settler leaders and Housing and Construction Ministry planners. Unless the U.S. makes it clear that it has zero tolerance for settlement construction - with no more games about natural growth, or construction only within a settlement's existing built-up area - it will find itself hemorrhaging credibility and political capital as it faces a constant onslaught of such plans. And it will find its Middle East agenda facing a not-so-slow death by settlements.

No Israeli government can be trusted to police itself when it comes to settlement activity, and even an Israeli government that wants to curb settlements needs pressure from the U.S. to do so.

The Efrat experience should serve as a wake-up call to the Obama administration, reminding it that the U.S. does not have the luxury of time when it comes to articulating - and backing up with real political investment - a policy of no tolerance for settlement expansion. If the U.S. doesn't articulate such a policy, settlers and their supporters will only be encouraged to believe that "yes they can" continue their efforts to make sure that peace and the two-state solution will never be achieved.

Lara Friedman is director of policy and government relations for Americans for Peace Now. Hagit Ofran is the director of Peace Now's Settlements Watch. The two are co-authors of the organization's periodic publication Settlements in Focus.