Wadi Fukin, occupied West Bank - Residents of Wadi Fukin have grown accustomed to the sounds of construction. This lush village, which sits just west of Bethlehem along the Green Line, is surrounded on three sides by Israeli settlements that are constantly growing.

Dotted with olive trees and natural springs, the village of 1,200 people is known for its harvest of organic turnips, cabbage and chili peppers. But this small community has borne the brunt of heavy settlement activity for many years. One of the Jewish settlements surrounding the village, Beitar Illit, is so large that it is one of only four settlements in the West Bank classified by Israel as a "city".

Sunday brought even more bad news for Palestinians here: Israeli authorities announced that nearly 400 hectares of land nearby - in what they refer to as the Etzion settlement bloc - are now "state land". This means they are no longer privately owned by Palestinians, and therefore can be used for possible settlement construction.

A settlement watchdog group, Peace Now, called the Israeli move the largest land-grab since the 1980s. Building here would ensure territorial continuity between the Green Line and the settlements of Beitar Illit, Kfar Etzion, and Gevaot, and would help link West Bank settlements such as Gush Etzion directly with Jerusalem, cutting off Palestinian access in the process.

"The land is very close to the border and ... is a very strategic area," said Yariv Oppenheimer, general director of Peace Now. "For Israelis it will connect some of the settlements into south Jerusalem, and for Palestinians it's land that can allow them to expand villages around Bethlehem also south to Jerusalem."

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Last year the government invited bids for the building of 1,000 new settlement units on the site known as Gevaot. Construction there, Israel said, did not constitute a new settlement because Gevaot has been designated as a neighbourhood of Alon Shvut, an existing settlement several kilometres down the road.

"We were surprised early this morning to find the Israeli civil administration and military handing out warning slips and putting up signs declaring the appropriation of more than 2,000 dunams [200 hectares] for the expansion of three settlements that surround the village," said Ahmad Sukkar, head of the Wadi Fukin village council.

How is it possible that this is state land? I inherited this plot of land from my father, and him from my grandfather. We already live in a prison that prevents us from expanding for population or agricultural needs. - Mohammad Assaf, Wadi Fukin resident

Israel says that the land - from Beit Furik and the nearby villages of Surif, Husan and al-Jabaa - is slated to be part of its own borders in any permanent solution it reaches with the Palestinians in the future.

"How is it possible that this is state land?" said Mohammad Assaf, a village resident. "I inherited this plot of land from my father, and him from my grandfather. We already live in a prison that prevents us from expanding for population or agricultural needs."

Washington slammed as the move as "counterproductive" to peace efforts, which have been put on hold by Israel since Palestinians signed 15 international human rights treaties and Fatah and Hamas forged a unity pact in April. Talks were also suspended as Israel launched a 50-day military offensive in Gaza which claimed the lives of some 2,000 Palestinians, most of them civilians; and 71 Israelis, most of them soldiers.

"This announcement, like every other settlement announcement Israel makes ... is counterproductive to Israel's stated goal of a negotiated two-state solution with the Palestinians," a US State Department official said. "We urge the government of Israel to reverse this decision."

The Israeli military gave no reason for the move announced on Sunday. A spokesman for the Coordinator of Government Activities in the Territories only confirmed that "according to the instructions of the political leadership at the end of the operation 'Brother's Keeper', [we] started the process of declaring around 4,000 dunams at Gevaot in the Etzion region as state lands".

Israel Radio, however, said the move was a response to the kidnapping and killing of three Israeli settler teenagers who were hitchhiking in the occupied West Bank in June.

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Israeli Justice Minister Tzipi Livni said the move affects Israel negatively as it embarks on a post-Gaza-war diplomatic campaign.

"Now, when we need to mobilise the world to prevent processes against Israel and work together with moderate forces, anything that could deflect attention onto us and cause criticism of us harms those things we are trying to achieve," she said.

Similarly, Peace Now's Oppenheimer said the move does not support moderate Palestinian forces who are actively seeking a peaceful resolution to the conflict.

"I think this is a huge mistake [by Israeli premier Benjamin] Netanyahu," Oppenheimer told Al Jazeera. "The message [from] this action is when you approach Israel about a peaceful solution, the outcome is settlement activity. And when you are Hamas firing missiles at Israel, then Israel is ready to speak with you."

This Israeli move has cast a spotlight once more on land confiscations and settlement expansion in the West Bank, which the US partially blamed for the breakdown in talks between Palestinians and Israelis earlier this year.

"Under the cover of its latest campaign of aggression in Gaza, Israel pursued a stepped-up campaign of violence [and] settlement expansion [in the West Bank]," said Palestine Liberation Organization (PLO) executive committee member Hanan Ashrawi. "Today's announcement clearly represents Israel's deliberate intent to wipe out any Palestinian presence on the land and to wilfully impose a de facto one-state solution," she added.

Meanwhile, residents of Wadi Fukin and the nearby villages have 45 days to appeal in an attempt to stop this land-grab.

"In 1948, we had 12,000 dunams [12 square kilometres] of agricultural land," Sukkar said. "Today that number has dwindled to 2,600 [dunams]. We are only allowed to farm on 250 dunams of those. That's why we will go to the [Israeli] courts. We will not stand idly as Israel carves up and snatches our land."

Follow Dalia Hatuqa on Twitter: @DaliaHatuqa