Israel's foreign ministry on Wednesday condemned an EU decision to effectively label parts of an Israeli town as a settlement, in a new list of locales not entitled to European tariff exemptions.

"For anyone who deals in reality, there is not the slightest doubt that the Modiin, Maccabim and Reut localities are an integral part of Israel, and their future is not in question," the ministry said in a statement.

In a list published this week, the European Union designated parts of the city known as Modiin-Maccabim-Reut, which lies half-way between Tel Aviv and Jerusalem, as outside Israel for the purposes of a tariff exemption programme.

The three postcodes included in the list fall in an area that is beyond the 1949 armistice line known as the Green Line, inside a narrow ribbon designated as no-man's land.

The EU specifically prohibits members from applying a tariff exemption granted to Israel, to Israeli products manufactured inside the Arab "territories brought under Israeli administration since June 1967," including the West Bank, Gaza Strip and Golan Heights.

The foreign ministry said the EU "ignores reality when it extends the domain of conflict to places and issues that do not belong there."

And it said the EU's decision to publish the list, "unacceptably cut off a negotiating process regarding this very issue."

Information Minister Yuli Edelstein also protested the decision.

"We will submit a complaint with the European authorities about this unjust and mistaken decision, which is like a boycott measure," he told Israeli public radio.

The EU's mission in Israel challenged the foreign ministry's comments.

"Contrary to the statement by the foreign ministry ... Modiin-Maccabim-Reut is not included in its entirety in this list," it said.

"In fact the list refers only to three postcodes -- 71724, 71728 and 71799 -- that correspond to the small part of Modiin-Maccabim-Reut that is situated beyond the Green Line," the EU statement said.

"Again, contrary to the assertion... that the EU unacceptably cut off a negotiating process, the publication of (the list) does not require negotiations," it added.

"However, prior to its publication, the EU, in accordance with the 2004 Arrangement, extensively consulted with the Israeli government and its suggestions have been taken into account as far as possible.

"The EU has consistently called upon the parties to resume negotiations on all final-status issues, including borders," it concluded. "The EU will recognise any changes to the pre-1967 borders agreed by the parties."