"There is no prohibition on travelling on buses with Israelis," a senior source at the defence ministry wrote in response to a query from AFP.
On Monday Attorney General Yehuda Weinstein was reported to have asked Defence Minister Moshe Yaalon to explain alleged plans forbidding West Bank-based Palestinian workers from travelling to and from Israel on buses used by settlers.
Israeli rights group B'Tselem on Sunday accused Yaalon of issuing a racially motivated edict.
"It is time to stop hiding behind technical arrangements... and admit this military procedure is thinly veiled pandering to the demand for racial segregation on buses," said B'Tselem.
Palestinians heading to work in the Tel Aviv or central Israeli area currently enter the Jewish state through the Eyal military checkpoint, near the West Bank city of Qalqiliya, where they are checked before being allowed to board.
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On the return journey they are free to choose alternative routes, including those passing straight through checkpoints and calling at settlements inside the West Bank, that get the Palestinians closer to their homes and with less delay, said B'Tselem spokeswoman Sarit Michaeli.
Those options would disappear under the new plan, which she told AFP was a "pilot scheme" where the Palestinians' bus ride would leave them back at Eyal where it would terminate.
The defence ministry source said "the workers will have to return through the same crossing from which they left in order to keep tabs on entry and exits as all sovereign countries do, which reduces the chance of (militant) attacks," adding that there was no blanket prohibition on travelling with Israelis.
Michaeli said the plan was meant to appease settlers who objected to sharing public transport with the Palestinians on the homeward leg by putting the workers through one point.
"To say the ministry's response is disingenuous is an understatement," she said.
"The reality of the situation is that these settlers do not want to travel on buses with Palestinians. They're simply not interested in these workers coming home on their buses after they've worked."
The new rules would initially apply only to Palestinians coming through Eyal and not to those entering at other crossings throughout the West Bank, she said.