The European Union is to start treating Israeli settlements in the occupied Palestinian territories as separate from Israel and exclude them from all kinds of cooperation.
According to Tuesday's edition of Haaretz newspaper, the "binding" decision is expected to take effect on the ground this Friday.
"The European Union has published a binding directive to all 28 member states forbidding any funding, cooperation, awarding of scholarships, research funds or prizes to anyone residing in the Jewish settlements in the West Bank and East Jerusalem," Haaretz said.
The newspaper reported anonymous officials in the Israeli foreign ministry calling the move an "earthquake." The reason, he explained, is that "understandings and quiet agreements that the Union does not work beyond the Green Line were turned into formal, binding policy."
Haaretz also reported that the decision included a demand by the EU for Israel to make clear when it signs any agreement with Brussels that the Israeli settlements are not part of the state of Israel.
Israeli Radio said in the morning that the occupied Syrian Golan Heights is also included in the decision based on the EU position which does not recognise Israeli occupation after 1967.
Europe has long opposed much of Israel's policy in the West Bank and East Jerusalem. It said in a statement issued in December its "longstanding position is that Israeli settlements are illegal under international law," and it does not recognise Israel's sovereignty over the occupied territories.
In March EU foreign policy Chief Catherine Ashton called for implementing the labelling of products produced in the settlements for sale in Europe.