Benjamin Netanyahu has won a legislative battle over the demolition of a West Bank outpost while at the same time approving the construction of 300 new units of housing in the West Bank.

The Israeli Prime Minister won praise from centrist and left-wing politicians after he threatened to fire any government minister who backed a bill that would have legalised housing in the Ulpana outpost.

Mr Netanyahu had been given until July 1 to acquiesce to a Supreme Court ruling to demolish the outpost. Announcing that he would keep to this deadline, he said today that while he supported settlements, Israel was a "law-abiding democracy" and the government had to honour the court's decision.

The bill, which was defeated, would have removed the need to demolish the outpost, which was built in the West Bank neighbourhood of Beit El.

Instead, Mr Netanyahu's plan means that the five homes in Ulpana will be transferred to a military area nearby while 300 new housing units will be built in the West Bank.

He said: "I am obligated to preserve the law and preserve the settlements, and I say here that there is no contradiction between the two."

Kadima Knesset member Yoel Hasson said: "The decision proves that Kadima moves Netanyahu and his government to the centre of the political map, pushing them away from the radical extremists."

Aryeh Eldad, a legislator from the far-right National Union party, said: "This is a government of cowards."