Benjamin Netanyahu said other solutions had been raised in recent days but insisted the demolition of the Bedouin settlement would still happen.
“Khan al Ahmar will be evacuated, it’s a court ruling, that’s our policy and it will be done,” he said.
“I have no intention of postponing this until further notice, contrary to reports, but rather for a short, defined period of time.”
The destruction of the corrugated shacks, home to 180 people, could be a war crime, according to the International Criminal Court’s chief prosecutor.
The Palestinian chief negotiator, Saeb Erekat, told Sky News last month that the plan amounted to “ethnic cleansing” and was part of a bigger plan to create an “apartheid state”.
European countries have also criticised the move amid concerns such demolitions threaten the prospect of a future Palestinian state.
The Palestinian Authority says if Israel creates new “facts on the ground” the West Bank will be cut off from East Jerusalem – the place they hope to make their capital.
Large protests have taken place on the site – which is on the main road between Jerusalem and the Dead Sea.
Israel’s supreme court has rejected a final appeal and the country says Khan al Ahmar was built illegally in an unsafe area near a major road.
It has offered to resettle people a few miles away and connect them to water, electricity and sewage treatment, but critics say it is extremely difficult for Palestinians to get building permits.
They say the encampment will be razed to make way for new Israeli settlements.
Mr Netanyahu and his cabinet will meet to decide the length of the delay on the demolition.
The village is in Area C of the West Bank, which is under exclusive Israeli control and home to many of their settlements.
The Palestinians claim all of the West Bank and say Area C, home also to around 150,000 to 200,000 Palestinians, is crucial to their economic development.
Waleed Assaf, from the Palestinian department of settlement affairs, said opposition would continue “until the Israelis completely revoke the demolition order”.
Regavim, an Israeli pro-settler NGO – which has petitioned the courts to relocate the village – accuses the Palestinian Authority of playing politics with the Bedouins.
The director of its international division, Naomi Kahn, told Sky News in September that the village was artificially created where it is because of its strategic importance.
Like many in Israel she sees the West Bank as disputed not occupied territory.
She said: “They’re not being removed from the area, they are being offered a much bigger and better more developed alternative and their traditions and their lifestyle are being very carefully preserved – this is not a war crime.”
Naftali Bennett, head of the pro-settler Jewish Home party, tweeted on Sunday: “In a nation of laws, you enforce the law even if the international community objects and threatens.”