This is the latest move by Prime Minister Benjamin Netanyahu’s far-right government to promote settlement activity in the territory.

"Settlement activity in all its forms is illegal and devoid of any legitimacy, which is confirmed by the decisions of international legitimacy and the rules of international law," the Egyptian Ministry of Foreign Affairs said in a statement on Wednesday.

The Egyptian foreign ministry said such decisions and legislation impede the ongoing efforts to achieve calm between Palestinian and Israeli sides and fuels anger among the Palestinian people.

"They also complicate the political and security climate in the occupied Palestinian territories every day," the statement added.

Israel's government headed by Ariel Sharon passed a 2005 law banning Israeli settlements in the West Bank and Gaza, causing the evacuation of four such settlements in the occupied territories.

However, the coalition of Netanyahu’s government, which puts settlement expansion at the top of its agenda, pushed for a repeal of the ban.

On Tuesday, the Knesset voted for repeal by 31 to 18 in the 120-seat assembly while other members did not vote.

The move comes two days after Israel pledged to halt discussions of new settlement construction for four months and stop plans to legalise unauthorised settlement outposts for six months in the Sharm El-Sheikh follow up meeting.

The meeting, held on Sunday was a follow up to last month's Aqaba summit, brought together high-level officials from the Palestinian Authority, Israeli government, Egypt, Jordan and the United States.

They discussed steps to lower tensions ahead of the holy month of Ramadan the holy days of Passover and Easter in Palestine.

Palestinian and Israeli officials reaffirmed a commitment to de-escalate and prevent further violence.

They also reaffirmed their commitment to all previous agreements, including pledges to stop unilateral actions and stated that all outstanding issues would be addressed through direct dialogue.

On Tuesday, the far-right Israeli Finance Minister Bezalel Smotrich used a map of Israel that incorporated Jordanian and occupied Palestinian territories, which Egypt described as "irresponsible behaviour".