British foreign secretary urges Israel to reverse decision to seize 990 acres of Palestinian land near Gvaot to create new city

The UK and US governments have criticised, in unusually strong language, Israel's decision to approve one of the largest appropriations of Palestinian land for settlement in recent decades.

The UK foreign secretary, Philip Hammond, said he deplored the move as "particularly ill-judged".

However, Israel's economics minister, Naftali Bennett, who visited the Gush Etzion settlement in the occupied West Bank on Monday, applauded Sunday's decision as an "appropriate Zionist response to murder". Bennett said: "What we did yesterday was a display of Zionism. Building is our answer to murder."

The settlement affects nearly 400 hectares (1,000 acres) at Gvaot near Bethlehem, which have been designated as state land, as opposed to land privately owned by Palestinians, clearing the way for the potential Israeli building.

Israel's announcement comes after an apparently concerted effort by some of its officials and politicians to use the kidnap and murder of three religious students earlier this summer to justify the expropriation.

The direct link between the murder of the three students, which shocked Israeli society, and the announcement suggests the move was designed in part as a punitive measure.

Israel's decision has been condemned by senior Palestinian government figures and Israel's chief negotiator in the stalled peace process, the justice minister, Tzipi Livni, who said the decision would damage Israel's security in the long run. "The decision was incorrect," Livni told Israel Radio News. "It was a decision that weakens Israel and damages its security."

Settler representatives said they hoped to expand around Gush Etzion to create a contiguous new city for thousands.

Explaining the decision on Sunday, the Co-ordination of Government Activities in the Territories said there was no Palestinian claim on the area but that protesters could register their opposition within 45 days. Local Palestinians, including the mayor of nearby Surif, Ahmad Lafi, insist the land belongs to Palestinian families.

According to a report released by the PLO's negotiations affairs department: "The illegal settlement of Gvaot was established in 1984 as a military base. It was later transferred to a Yeshiva (Jewish religious school) and currently is inhabited by 16 families. The recent Israeli confiscation would allow for the illegal settlements to grow to the size of a city. It aims at linking the illegal settlement with the green line, grabbing more Palestinian land so as to facilitate future annexation."

Settlers and their supporters in the Israeli government have long sought to build on the land around Gvaot, currently the site of a small settlement. They claim there is an Israeli consensus that in any future peace deal, the settlements around Gush Etzion would be annexed to Israel.

That position is rejected by Palestinians and many in the international community, including the US. "We have long made clear our opposition to continued settlement activity," the US official told Reuters on Sunday night.

"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. "We urge the government of Israel to reverse this decision," the official said.

Hammond used even stronger language on Monday, saying the decision threatened to damage Israel's standing in the international community. "Our position on settlements is clear," Hammond said. "They are illegal under international law, present an obstacle to peace and take us further away from a two-state solution at a time when negotiations to achieve this objective urgently need to be resumed."

The kidnap and murder of the three teenagers, blamed by the Israeli government on Hamas, has now been used to justify mass arrests on the West Bank, as a contributory cause to the recent 50-day war in Gaza, and now one of the largest appropriations of land for settlement building in recent memory. Some Israeli critics of Binyamin Netanyahu's government have suggested the announcement was a response to the significant pressure applied to Netanyahu from the extreme rightwing elements of his coalition.

Netanyahu has faced strong criticism from within his own cabinet – not least from Bennett – and the Israeli media for agreeing a ceasefire with Hamas, they have argued, without enough gains.