The agreement between the government and the settlers of the Migron outpost has fallen through at the last moment.
Representatives of the 50 families living at the settlement north of Jerusalem refused to sign an agreement after being instructed by rabbis to insist on a clause that would rule out any demolition of the outpost's buildings and ensure a "Jewish presence" on the site.
Cabinet Minister Benny Begin, who represented the government in the talks with the settlers, said on Sunday that a deal had been reached last week.
The government would request from the High Court a three-year extension of the eviction order, during which a new neighbourhood would be built for the families currently living on the outpost that was built on private Palestinian land. The original outpost would be transferred to the Civil Administration which would put it to non-residential use, most likely agriculture.
Mr Begin warned the settlers that if they did not sign the agreement, the government would have no choice but to carry out the court order to evict and dismantle the outpost by the end of this month.
Itai Chemo, the Migron spokesman, denied that they had retreated from the agreement.
He said: "We agreed to move and to pass the site to the Civil Administration but there is no reason to destroy Migron.
"We are here as representatives of the state of Israel and so far, no-one has proved legal ownership."