Israeli officials have tentatively agreed to legalize five Jewish settlements in the occupied West Bank, a move that could further inflame tensions between Israelis and Palestinians and draw the ire of the international community, but one that advances the expansionist agenda of Prime Minister Benjamin Netanyahu’s right-wing government.

Israel’s far-right finance minister, Bezalel Smotrich, has agreed to release funds he has been withholding from the financially strapped Palestinian Authority, which administers some West Bank areas under Israeli military rule, in exchange for strengthening Israeli settlements in the territory, his office said on Thursday.

The tentative agreement would ease some of the financial pressure on the Palestinian Authority but would officially tighten Israel’s hold on the West Bank, further complicating any future effort to reach an agreement on a two-state solution for Palestinians and Israelis.

Much of the international community views Israeli settlements in the West Bank as illegal, and many of the outposts are illegal under Israeli law, too, but are tolerated by the government. Many whose creation violated Israeli law were later legitimized by the Israeli government, granting them formal access to services like running water, electricity, building permits and funding.

Still, outposts have grown with the tacit agreement of the government for decades. Mr. Netanyahu last year decided to ease the process for approving new settlement construction, transferring authority from the defense minister, Yoav Gallant, to Mr. Smotrich, who believes Israel should annex the West Bank and rule it permanently.