In recent years, Airbnb has faced criticism from Palestinians for hosting Israeli listings in the West Bank that failed to mention the property was located on land claimed by the Palestinians.
In a press release issued Monday, the company said the decision would affect some 200 Airbnb listings.
Senior Palestinian official Saeb Erakat, however, said it was "crucial for Airbnb to follow the position of global law that Israel is the occupying power and that Israeli settlements in the West Bank, including occupied east Jerusalem, are illegal and constitute war crimes".
Senior Palestinian officials and a number of NGOs have urged Airbnb to join the worldwide movement boycotting settlement products or companies doing business in the West Bank. "There are many strong views as it relates to lands that have been the subject of historic and intense disputes between Israelis and Palestinians in the West Bank". "If this decision won't be changed", he said, "we'll take every measure possible to restrict the operation of Airbnb here in Israel".
Minister for Tourism Yariv Levin lambasted the website as "discriminatory" and called for retaliation to "limit the company's activity throughout the country", according to local newspaper the Times of Israel.
Diana Buttu, the Palestinian-Canadian lawyer and former spokesperson for the PLO, also tweeted in support of the decision, saying she was "glad they [Airbnb] are getting the message that the world doesn't think it's OK to steal land".
But in Israel, Airbnb's decision drew ire.
Ocasio-Cortez Was Mocked for Calling Gov Branches 'Chambers'
Now that she's in Congress , she has an opportunity to redefine what a lawmaker looks like - even if she sticks to the dress code. Fox News , meanwhile, has attacked Ocasio-Cortez both for displaying too much glamour and for showing signs of struggling.
Palestinian leaders had called on Airbnb to remove the listings in Israeli settlements almost three years ago, saying in a letter to the company that "Airbnb is effectively promoting the illegal colonization of occupied land".
"National conflicts exist all over the world, and the heads of Airbnb will have to explain why they chose to take a racist political stance against some of Israel's citizens", he noted.
The decision was announced the day before Human Rights Watch was set to publish a report examining Airbnb's business in the settlements.
"It is an important and welcome step and we encourage other companies like Booking.com to follow their lead and stop listing in settlements".
"National conflict exist throughout the world and Airbnb will need to explain why they chose a racist political stance against some Israeli citizens", Haaretz quoted Erdan as saying, adding that he said he would be consulting senior US officials "to check if the company's decision violated the anti-boycott laws that exist in over 25 states".
"We are most certainly not the experts when it comes to the historical disputes in this region".
"This is an unfortunate decision that constitutes submission to the anti-Semitic BDS organisations and is based on political considerations rather than business considerations", said Strategic Affairs Minister Gilad Erdan.