The formal authorisation follows a November 2010 cabinet decision to build a facility for mostly African migrants smuggled across Israel's borders but who for legal reasons cannot immediately be deported to their countries.
Tuesday's defence ministry statement said that the new facility to be built in the south of the country would start receiving detainees within the first half of 2012.
It said that it would have an initial capacity of 3,000 people, rising to 11,000 by completion.
"The majority of the structures will be mobile and/or collapsible," it said so that they could be used again for future projects.
Israel is erecting a giant security barrier along its 240-kilometre (150 miles) border with Egypt's Sinai peninsula and plans to put up a similar structure along its 238 kilometre (148 miles) frontier with Jordan.
Work on the Egypt barrier began a year ago, in a project initially aimed at stemming a growing tide of African migrants, as well as clamping down on cross-border trafficking in drugs and women.