Israel announced Sunday that the land in and around the Wadi Fukin valley, would become "state land," clearing the way for the development of a new Israeli settlement. The affected land lies near Bethlehem and close to Bitar Ilit -- one of the biggest Israeli settlements in the West Bank.
Farmers in the area have 45 days to appeal Israel's decision to claim the land.
"The seizure of such a large swathe of land risks paving the way for further settlement activity, which -- as the United Nations has reiterated on many occasions -- is illegal under international law and runs totally counter to the pursuit of a two-state solution," United Nations Secretary-General Ban Ki-moon said in a statement Monday.
UK Foreign Secretary Philip Hammond issued a similar statement, criticizing the move.
"This is a particularly ill-judged decision that comes at a time when the priority must be to build on the cease-fire in Gaza. It will do serious damage to Israel's standing in the international community," he said. "Our position on settlements is clear: they are illegal under international law, present an obstacle to peace and take us further away from a two state solution at a time when negotiations to achieve this objective urgently need to be resumed."
Hammond said efforts should be focused on securing a durable cease-fire in Gaza and lasting peace. "We strongly urge the government of Israel to reverse this decision," he said.
Israeli officials told CNN the expropriation was linked to the kidnapping and murder of three Israeli teenagers who disappeared from the West Bank settlement of Gush Etzion in June. Tensions between Israel and Hamas ratcheted up after the teens' bodies were found June 30.
Both sides last week agreed to an open-ended cease-fire following more than seven weeks of heavy fighting.
Hamas has said the teens were abducted by Hamas militants who did not inform the group's leadership about their operation.
The Israeli Civil Administration, which rules over Palestinians in Israeli-controlled areas of the West Bank, has posted "no trespassing" signs in the valley.
Farmer Mahmoud Mifrah, 66, told CNN he had grown vegetables and olives in Wadi Fukin for 42 years and did not see why he should suffer the consequences of others' crimes.
"We are the neighbors of the Israeli people," Mifrah said. "We share water and air and everything. We have to find a way to live together."
The Palestine Liberation Organization said the expropriation was the "the largest Israeli land grab in the Occupied State of Palestine in three decades."
"This move is further proof of Israel's relentless policy of destroying the prospects for a negotiated peace and an independent Palestinian state, living side by side the State of Israel in peace and security," the PLO said in a statement.
The Israeli group Peace Now expressed bafflement at the move.
"It's a crazy idea. In my view it's collective punishment not only to Palestinians but also to Israelis that it's actually killing our chances to get to peace some day, and a two state solution," spokeswoman Hagit Ofran said.