Egypt on Monday denounced Israeli plans to expropriate West Bank land, saying the move violates international law and is an obstacle to efforts for a lasting Palestinian-Israeli settlement.
On Sunday, Israel said it would expropriate 400 hectares (988 acres) of Palestinian land around Bethlehem, and allowed 45 days for any appeal.
"This is not a positive step -- it contradicts international law and will have negative consequences on the peace process," a foreign ministry statement in Cairo said.
Egypt last week mediated a permanent truce between Israel and the Hamas rulers of the Gaza Strip enclave to end a bloody and devastating 50-day war -- the deadliest in years.
Negotiators are expected to return to Cairo within a month to discuss crunch issues such as Hamas's demands for a port and an airport and the release of prisoners, as well as Israel's call for militants in the Palestinian territory to be disarmed.
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The foreign ministry did not mention the Gaza truce talks but insisted that Israel's planned land grab in the West Bank would be "an obstacle" to a two-state solution between Israel and the Palestinians.
Rights watchdog Amnesty International also denounced the Israeli plans, saying that it "appears to be the largest land grab in the occupied Palestinian territories since 1980".
"Israel’s strategy of illegally confiscating land for settlements in the West Bank must stop once and for all," said Amnesty's Philip Luther.
On Sunday, the Israeli army department tasked with administering civil affairs in Palestinian occupied territories said: "On the instructions of the political echelon... 4,000 dunams at Gevaot (settlement) is declared as state land."
It said the move stemmed from political decisions taken after the abduction and murder of three Israeli teenagers in the same area, known to Israelis as the Gush Etzion settlement bloc.
The Palestinians have called for diplomatic action against Israel, while Israeli peace campaigners said the land expropriation is the biggest of its kind in three decades.
"As far as we know, this declaration is unprecedented in its scope since the 1980s and can dramatically change the reality in the Gush Etzion and the Bethlehem areas," Peace Now said on Sunday.