"Israel’s decision to build a new illegal settlement in occupied Hebron is the first tangible result of the US decision to legitimize colonization," said Palestine Liberation Organization secretary-general Saeb Erekat in a tweet on Sunday.
"This cannot be taken out of the context [of] annexation," he said, according to Press TV, adding that "Concrete measures, including sanctions against settlements are an international responsibility".
The remarks came hours after Israel's Minister for Military Affairs Naftali Bennett announced a controversial plan to construct a new settlement in the heart of the West Bank city.
The planned project will “double” the number of Israeli settlers in the city, Bennett said.
Despite being home to about 200,000 Palestinians, significant parts of the city's center are already occupied by about 800 Israeli settlers.
The settlers are guarded by hundreds of Israeli soldiers.
Erekat's Sunday remarks highlighted that the Israeli announcement came after Washington effectively granted Israel a green light to proceed with plans to further occupy the West Bank.
Israeli settlement expansion was “not per se inconsistent with international law,” said US Secretary of State Mike Pompeo in the announcement that drew widespread international condemnation last month.
The policy-shift effectively reversed Washington's four-decade position regarding the illegal status of Israeli settlements.
Currently more than 600,000 Israelis live in over 230 settlements built since the 1967 Israeli occupation of the Palestinian territories of the West Bank and East Jerusalem al-Quds.
The Israeli settlements are illegal under international law and have been condemned almost unanimously by the international community.