Sanctioning more West Bank settlements will kill the two-state solution.
Speaking after an Israeli ministerial committee authorised three illegal West Bank outposts, Mr Erekat called on Israel to choose between settlements and peace. He said the Palestinians would seek a new United Nations security council resolution condemning settlement activity.
Peace Now, an Israeli anti-settlement pressure group, said the decision marked the first time since 1990 that the government had created new settlements.
The international community considers all Israeli construction in the West Bank illegal. Israel distinguishes between the 121 established settlements, and scores of illegal outposts, set up without a formal government decision.
The newly-authorised outposts are Bruchin, with some 350 settlers, and Rechelim, with 240 residents, both south of Nablus in the northern West Bank, and Sansana, with a population of 240, in the southern West Bank.
Each was set up without formal government approval.
Interior minister Eli Yishai called the decision "important and just," and he urged the government to legalise more Jewish West Bank communities.