Airbnb said Monday it will remove from its rental listings settlement homes in the occupied West Bank, prompting Israel to threaten legal action against the US company.
An evaluation by Airbnb "concluded that we should remove listings in Israeli settlements in the occupied West Bank that are at the core of the dispute between Israelis and Palestinians."
"We know that people will disagree with this decision and appreciate their perspective. This is a controversial issue," Airbnb said in a statement.
The decision will affect around 200 homes in Israeli settlements which had been listed on the platform.
The international community considers the settlements to be illegal and a key barrier to peace between Israelis and Palestinians.
Human Rights Watch's director for Israel and the Palestinian territories, Omar Shakir, said Airbnb's decision was a "welcome step".
"Companies like Booking.com should follow suit," he wrote on Twitter.
Around 400,000 Israelis live in settlements that dot the West Bank and range in size from tiny hamlets to large towns, in addition to 200,000 living in settlements in occupied east Jerusalem.
Israel's tourism minister criticised Airbnb's move as "shameful and unfortunate".
"Our ministry has started to prepare immediate measures to limit Airbnb's activities" in Israel, Yariv Levin said in a statement.
As a counter-measure, Levin said he would re-launch a programme to encourage short-term rentals of properties in Israeli settlements.
Senior Palestinian official Saeb Erakat welcomed Airbnb's decision as "an initial positive step".
Erakat said it was "crucial for Airbnb to follow the position of international law that Israel is the occupying power and that Israeli settlements in the West Bank, including occupied east Jerusalem, are illegal and constitute war crimes".
"We reiterate our call upon the UN Human Rights Council to release the database of companies profiting from the Israeli colonial occupation," he said in a statement.
The Yesha Council, the main organisation representing Israeli settlers, accused Airbnb of becoming "a political site".
The decision "is the result of either anti-Semitism or capitulation to terrorism, or both", the council said.
Israel's internal security minister, Gilad Erdan, called on settlers affected "to consider filing lawsuits against Airbnb", appealing to a law penalising the boycott movement against Israel.
Palestinians in 2016 threatened to take legal action against Airbnb over its West Bank listings, accusing the company of presenting homes in occupied territory as if they were in Israel.
Airbnb at the time said the US-based firm "respects the laws in force where it operates and investigates the concerns raised on the subject of some listings".