Alaska said Tuesday it would challenge an Obama administration decision to designate offshore sea ice and other areas as critical habitat for the polar bear, ramping up a policy fight over waters that are important to both wildlife and the oil industry.

The U.S. Interior Department issued the final rules in November, saying 187,000 square miles were critical habitat for a species that the U.S. government has listed as endangered. The designation doesn't automatically prohibit commercial development, but it does force the...