The land is in the Etzion bloc near Bethlehem. It may be used for possible Jewish settlements and a new Israeli city to be called Gevaot.
Israel's army says it is declaring the land as "state-owned" under orders from political leaders. It is in reaction to the kidnapping and murders of three Israeli teenagers in June near Bethlehem.
Israel has named three Palestinians as suspects. The murders and the revenge killing of a Palestinian teen by Israelis helped spark the recent fighting between Israel and Hamas in Gaza.
The U.S. State Department is calling the Israeli land takeover "counterproductive" in peace efforts and is asking Israel to reconsider.
Chief Palestinian negotiator Saeb Erekat is condemning the move as part of what he calls Israeli crimes against the Palestinian people and their occupied land.
A spokesman for the anti-settlement group Peace Now, Yariv Oppenheimer, said the settlement expansion will hurt the chances for further Israeli peace negotiations with Palestinian President Mahmoud Abbas.
"This new declaration of expansion of settlement by the Israeli government is very significant. We don't remember such a big announcement in the last one or two decades," said Oppenheimer. "This is a stab in the back of Abbas and the moderate people in the Palestinian Authority. Instead of strengthening the Palestinian Authority versus Hamas, Israel is showing its harder side and actually in a unilateral move: expand settlement activity and destroy the chance for re-negotiation with the Palestinian Authority.''
Israeli Prime Minister Benjamin Netanyahu has been a staunch advocate for expansion of Israeli settlements in the West Bank, land that Israel captured during the Six-Day War in 1967. Israel often has drawn condemnation, though, for its settlement expansion, which most countries consider illegal under international law.
About 550,000 Israelis live among 2.4 million Palestinians in the West Bank and occupied east Jerusalem.