Senior Turkish and British government and UN officials condemned a new Israeli bill which legalises settlements built on privately owned Palestinian land.
The "Legalisation Law" passed last night allows for the retroactive legalisation of a number of Israeli outposts built in the occupied West Bank on confiscated Palestinian lands.
The UK's Parliamentary Under Secretary of State at the Foreign and Commonwealth Office Tobias Ellwood said the decision "damaged Israel's standing on the international stage."
"It's of great concern the bill paves the way for significant growth in settlements in the West Bank, which threatens the viability of the two-state solution," he said.
Some 4,000 homes had been already built on private Palestinian land in the occupied West Bank.
In a similar response, the Turkish foreign ministry condemned the Israeli law.
A statement said the "unacceptable" Israeli policy contradicted UN Security Council resolutions and was "destroying the basis for the two-state solution".
Under the law, Israel will either pay Palestinians compensation or alternative plots in return for the land which has been confiscated.
The United Nations' Mideast envoy warned that the Israeli law legalising unlawful West Bank settler outposts "crosses very, very thick red line".
Nickolay Mladenov added: "The legislation opens the floodgates to the potential annexation of the West Bank."
"It will have a drastic legal consequence for Israel and for the nature of its democracy," Mladenov said. "It crosses a very, very thick red line."
The Palestine Liberation Organisation (PLO) harshly criticised the law yesterday, considering it "a means to legalise theft" of Palestinian land.
The organisation added in a statement that "the law demonstrated the Israeli government's will to destroy any chances for a political solution."