According to official documents obtained by HaMoked, an Israeli group which works on Palestinian rights issues, the policy affected Palestinians travelling abroad for work or study in the period between 1967 and 1994 when the Oslo Accords came into effect.
Although HaMoked was aware of the procedure, it was never clear how many Palestinians had been affected until recently, when the group got hold of numbers through the Freedom of Information Act, with the story first exposed by the Haaretz newspaper.
According to the documents, any Palestinian travelling abroad during that period would have to leave his or her ID card at the Allenby Bridge crossing into Jordan, and in exchange would receive an "exit permit" which was valid for three years.
If a traveller did not come back before the permit expired, their documents were sent to the military administration in the West Bank which would re-register them as "no longer resident" -- or NLR, Haaretz said.
But the process was never explained to travellers meaning that many were unaware that not returning 'on time' could see their residency status revoked.
Those who arrived in the six months after the card expired were technically permitted to appeal to have their residency reinstated, but in practice, very few managed to reverse the procedure, HaMoked said.
"We knew this procedure existed but we never knew the scope of this policy," said Ido Blum, head of the legal team at HaMoked. "It is a very large number, representing about 14 percent of the residents of the West Bank population at the time."
But Blum said the numbers of people affected was likely to be far higher as the entire families would often leave to join the individual whose residency had been revoked.
"I believe that the number of Palestinians living in exile is much higher than 140,000 as if a father went to study or work abroad and his residency was revoked, his wife and children would leave and join him," he told AFP.
Blum said an identical policy had been applied in the Gaza Strip but so far, they had not been able to get access to the numbers.
Guy Inbar, a spokesman for COGAT, the defence ministry unit which coordinates activity in the occupied territories, refused to comment directly on the issue, saying: "We are not responsible for making such policies."