There were suspicions that Ahava, which sells Dead Sea minerals and mud around the world, had made the decision because of mounting pressure to shift its operations from the Palestinian territory.
The beauty products company said in a statement that it would "establish an additional plant" inside Israel, but has yet to explicitly confirm the West Bank factory will close.
Yet activists are seeing it as a victory for their campaign known by the initials BDS -- or Boycott, Divestment and Sanctions -- that calls for a boycott of Israel until it withdraws from the occupied territories.
The campaign is a decade old, but recent moves like Ahava's have raised the question of whether it has now gained steady momentum.
It has become an increasingly global fight, with skirmishes taking place not only in the West Bank but in courtrooms, parliaments and university campuses in New York, Paris and London.
Supporters of the campaign point to past moves by companies like SodaStream, which pulled out of the West Bank in September 2015, and British-Danish security giant G4S, which will leave Israel altogether.
But at the same time, some companies in the West Bank are proudly expanding, defying pressure not only from BDS but also the European Union, which recently began requiring products from Israeli-occupied territory to be labelled.
Israel is not taking BDS lightly, with officials calling it a "strategic threat" and budgeting 118 million shekels ($31 million) to fight it this year.
Both sides recently held strategy conferences and, perhaps unsurprisingly, both claim to be winning.
Strategic Affairs Minister Gilad Erdan told the pro-Israeli conference his government was seeking to "be able to thwart (criticism) in real time and even be one step ahead of BDS."
'Never leave this place'
BDS has sought to use the anti-apartheid campaign in South Africa in the 1980s as an example.
Israelis and others however accuse it of going beyond legitimate criticism into anti-Semitism, claims campaigners deny.
"They can't respond in the traditional way... to accuse of being terrorists or funded by terrorists. It is easy for the world to see this is not true," Jamal Juma, a member of the BDS executive committee in Ramallah, told AFP.
"(So) they are trying internationally to criminalise the movement."
Even the Palestinian government does not support a total boycott of Israel, though it does urge bans on products made in settlements on occupied land.
Some 2.8 million Palestinians live in the West Bank and annexed east Jerusalem in near constant tension with more than 500,000 Israeli settlers.
A man looks at caricatures by Israeli artists against the Palestinian-led Boycott, Divestment and Sanctions (BDS) movement
Israeli settlements and industrial zones in the Palestinian territory, which receive significant government subsidies, are considered illegal under international law.
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The anti-occupation NGO Gush Shalom estimates a glut of companies have left the West Bank in recent years, and even smaller firms face pressure to depart.
The Psagot winery now produces 250,000 bottles a year, but founder Yaakov Berg says he turned down a multi-million-dollar investment in the firm as the investors wanted him to relocate to inside Israel.
"I would never leave this place," he said.
The wider impact on Israel's economy so far seems limited.
Settlements represent only two-to-three percent of Israel's trade and the Yesha Council, which represents Israeli settlements, said the number of factories in settlements grew from 680 in 2011 to 890 in 2015.
But while smaller, ideologically motivated firms such as Psagot are unlikely to change course, some analysts say larger ones are feeling the pressure.
Ofer Zalsberg of the International Crisis Group think-tank said major firms that would have happily invested in the West Bank five years ago are now wary of doing so.
Moving the goalposts?
Israeli officials fear BDS's influence is slowly moving the goalposts.
In October, the European Union introduced labelling on products from the West Bank, while the US ambassador has been unusually outspoken in his criticism of Israel's West Bank policies.
Zalsberg said the Israeli government fears becoming delegitimised, as well as further measures such as excluding West Bank settlers from the automatic visas to European countries granted to Israelis.
Ben-Dror Yemeni, an Israeli journalist who campaigns against BDS, admitted they may never win the battle for public support in some countries.
"Right now the battlefield is public opinion in the West and I think they might prevail -- the BDS supporters," he said.
"It is so easy to sell this anti-Israel propaganda."
Israel has instead increasingly focused on measures limiting BDS legally.
Ron Lauder, president of the World Jewish Congress, said they first brought together 40 Jewish lawyers two years ago to develop a legal strategy.
"On the legal front, we are winning," Lauder recently told Israel's largest ever anti-BDS conference.
Events of recent months appear to bear out his claims.
In France, in October the high court effectively banned BDS in a ruling that has had a devastating impact.
In the United States, so far seven states have adopted resolutions condemning BDS, organised largely by evangelical Christian groups.
In Britain, the government has introduced new measures to prevent local government boycotts, while the Canadian parliament recently condemned BDS.
However, boycott movements on university campuses, have sought to keep up the pressure on Israel.