The development plan, once signed, will be in effect for 98 years, with the ability to extend the deal at a later point.
It will include 259 housing units, as well as areas sectioned off for trade and commerce, in addition to space for a hotel.
The winner of the bid will be responsible for initial construction costs, such as water and plumbing.
Lifta - Mei Neftoach in Hebrew - is the western-most neighborhood in Jerusalem, was abandoned in 1948 and is the last Arab town inside Jerusalem from that time that has yet to be resettled.
In 2017, Lifta was declared a national nature reserve by Israel.
In 2010, Ynet noted, a bid was published by the ILA, but faced opposition from various organizations, including Rabbis for Human Rights, a body of rabbis focused on Israeli and Palestinian human rights.
Yakoub Odeh, 81, was eight-years-old when the town was abandoned, and expressed the anger felt by others: "We are in pain and in shock... This decision is illegal," he told Ynet.
"Mazal tov Jerusalem!" Former-Jerusalem Municipality councilmember Yair Gabbai announced on his Facebook page on Monday.
"After years of delays the ILA published a public bid notice for rebuilding the new neighborhood in Lifta."
Gabbai added that a synagogue will be added to the neighborhood as well, writing that "it is exciting and symbolic that this is taking place on Jerusalem Day."
The tender brochure will be published in detail on July 4, 2021.
A copy of the brochure can be obtained from the offices of the Israel Lands Authority at *5575 or 03-9653333