Israel will not miss a "historic opportunity" to extend its sovereignty to parts of the West Bank, said PM Benjamin Netanyahu.

Palestinians consider such a move an illegal annexation of the occupied territories. Last week, Palestine announced the termination of security cooperation with Israel and the US in protest against this territorial plan.

Netanyahu set land moves in the West Bank as "perhaps the first in importance in many respects" of the tasks to be undertaken by the government, Reuters reported.

"We have a historic opportunity, which hasn't existed since 1948, to apply sovereignty judiciously as a diplomatic...step in Judea and Samaria," he said.

Netanyahu has referred to the US president Donald Trump's plan for Israeli-Palestinian peace as underpinning de facto annexation. The Palestinians have rejected the proposal under which most Jewish settlements would be incorporated into "contiguous Israeli territory".

Palestinians and most countries find it illegal to occupy the land that Israel occupied during the 1967 Middle East war. Israel disputes this.