The cable car will bring 3,000 people an hour to the Old City, according to a tweet from Israeli Finance Minister Moshe Kahlon announcing the decision, which was made at a meeting of the housing cabinet.
Large infrastructure projects in Jerusalem are often controversial due to the city's disputed status, and the cable car is no exception. Current plans see it crossing into Jerusalem's east, which Palestinians and most of the international community regard as occupied territory.
The cable car is planned to start at a boutique shopping and restaurant location called First Station, in the western part of the city. It would then cross into the eastern part, with a stop on Mount Zion, before ending near the Dung Gate entrance to the Old City, the closest access point for both the Western Wall and the Dome of the Rock.
When the project was still in its planning stages in 2016, then-Mayor of Jerusalem, Nir Barkat, said it would help bring ten million tourists to the Old City, while showing the world who is really in control in the city.
"To bring the wide world to this experience, to understand who really is the landlord of this city -- all of the infrastructure is geared toward this," Barkat told a group of visitors in an August 2016 video posted on his Facebook page.
East Jerusalem was captured by Israel from Jordan during the Six Day War in 1967 and annexed a short time later. In 1980, Israel declared the whole city to be its "complete and united" capital but Palestinians hope East Jerusalem will one day become the capital of a future Palestinian state.
Emek Shaveh, an Israeli NGO that has tracked development of the cable car, criticized the government's decision to approve the project.
"The government has not been able to approve budgets for the disabled and for health, yet it manages to approve a budget of 220 million shekels (62 million dollars) for a tourism venture," the organization said in a statement. "This indeed summarizes the priorities of the outgoing government." The organization has promised to appeal the approval to the High Court.
"In our opinion, a transitional government is not authorized to approve national projects of this magnitude and with such significant political implications for Jerusalem," read the Emek Shaveh statement. "The appeal to the High Court is intended to prevent the destructive impact that a cable car will have on the Old City landscape and on the fragile political situation in Jerusalem."
Adnan Ghaith, the Palestinian Authority Governor of Jerusalem, whose role is largely symbolic, also criticized the project.
"This is a Zionist project by the Israeli government to Judaize Jerusalem. They started with underground tunnels and now they want to Judaize the sky and change every Arab symbol in the city - the stone, the trees and the people," he told CNN.
"Palestinians in Jerusalem are not going anywhere, we will resist and be strong as always, but we call on the International community to take its historical responsibilities by stopping those endless crimes and protect our people in Jerusalem," said Ghaith.
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