"The year 2003 was a time of growth in the outpost industry and can be characterised by the efforts to turn these outposts into permanent settlements," the group said in its annual Ariel Outpost Survey for 2003.
With funds being ploughed into developing the 100 or so existing outposts, it is becoming increasingly difficult to differentiate between settlements the government has authorised and their smaller "illegal" neighbours.
Under the faltering international "roadmap" for resolving the Middle East conflict, Israel is supposed to demolish settlement outposts and end expansion of the existing settlements it has authorised.
The international community views all settlements on occupied Palestinian land as illegal.
Perched atop a steep hillside several kilometers (miles) to the north-west of Ramallah, the Harasha outpost has a commanding view of the surrounding territory. On a good day, say residents, you can even see the sea.
Established in June 1998, Harasha is home to some 30 families and has long been connected to the electricity grid, the water mains and the sewerage system, despite its illegal status.
A tall water tower on stilts and large children's playground stand at the top of the hill, surrounded by rows of sand-coloured caravans arranged in neat concentric circles.
Although there is no perimeter fence, Harasha has, since day one, had its own contingent of soldiers dedicated to protecting the residents.
"From the first day, the soldiers were guarding us -- there were five of them. I haven't stayed a single night here without protection," said a girl in her early twenties who refused to give her name.
And although she cannot remember exactly when the outpost was connected to the electricity or the water mains, it was "pretty soon" after the outpost was established.
Peace Now says there are 102 settlements supposedly unauthorised by the Israeli government in the West Bank, and last year 12 of them were connected to the electricity grid, eight had main roads paved up to their entrance, and 15 began building permanent structures on the ground.
"2003 can be characterised by the strengthening of existing outposts," said Dror Etkes, Peace Now's settlement watch coordinator. "The correct name for these outposts is 'new settlements'."
Etkes said the process of 'legitimising' such wildcat outposts was two-fold: firstly, they are connected up to the local infrastructure while the second stage involves building permanent structures -- all of which needed vast amounts of funding.
"These outposts could not exist without huge government support," said Peace Now founder Tsali Reshef, pointing out that the parliament had on Monday approved 96 million shekels (21.6 million dollars) for ongoing settlement activity.
Israeli Prime Minister Ariel Sharon (news - web sites) was "systematically misleading" the people, Reshef said.
"The government and the prime minister are deceiving the public continually and trying to give the impression they are getting out of the Palestinian territories," he said.
"(Sharon) is talking about pulling out when he is in fact continuing to build and populate these settlements," he said, referring to Sharon's plan for evacuating all Jewish settlements from Gaza.
But the Jewish Settlers' Council dismissed the report, saying settlement activity would continue unabated.
"All activity in the outposts was carried out by the relevant authorities," it said in a statement.
"Settlement activity in Judea, Samaria and Gaza will continue to develop in spite of terrorism and in spite of Peace Now," the council said, using the Biblical term for the West Bank.
Of the 102 outposts, 44 were established before Sharon came to power in March 2001 and another 55 set up in the period up to June 2003 when the Mideast peace roadmap was launched, Peace Now said.
Since June, another three outposts have been established, despite the roadmap stipulating that Israel must freeze all settlement activity and dismantle all outposts erected since March 2001.
