JERUSALEM, June 21 (Reuters) - Israel has approved the building of $100 million worth of new houses and schools in the Gaza Strip, Israeli and U.N. officials said on Tuesday.

Israel, together with Egypt, tightened a blockade on the Gaza Strip after Hamas Islamists seized it from forces loyal to Western-backed Palestinian President Mahmoud Abbas in 2007.

Guy Inbar, a military spokesman, said Israel had given the United Nations Relief and Works Agency (UNRWA) the green light to bring building materials for 18 new schools and 1,200 new houses into the Hamas-controlled territory.

He said the approval was immediate and the process could begin as soon as UNRWA was ready.

I welcome this significant step and I hope it will happen in a timely fashion, said U.N. Middle East envoy Robert Serry.

Israel says its Gaza blockade, which prevents many needed supplies from entering the Strip, stops weapons from reaching Hamas, a militant group that refuses to recognize Israel's right to exist and frequently fires cross-border rockets.

Palestinians believe the Israeli sea blockade is illegal and say it is helping to strangle the underdeveloped Gazan economy.

Israel has made clear it will prevent a planned pro-Palestinian aid flotilla from reaching Gaza. A year ago, nine Turkish activists, including one with dual U.S.-Turkish nationality, were killed in an Israeli raid on a similar convoy.

Israel, calling the new flotilla a provocation, has stepped up diplomatic efforts to block it. Organisers say the sea convoy, which they hope will set sail this month, will carry humanitarian aid and construction materials.

One foreign diplomat, speaking anonymously, suggested that Tuesday's approval for UNRWA to deliver housing materials may have been an Israeli attempt to undercut the rationale for sending another flotilla.

(Writing by Ari Rabinovitch, Editing by Alistair Lyon)