The Jordan Valley, making up some 20 percent of the West Bank, were seized by Israel in the 1967 Middle East war and controlled ever since despite global criticism. The Foreign Ministry branded Trump's plan "stillborn" and said it was aimed at "killing the two-state solution and stealing Palestinian lands".
The veteran Israeli right-wing politician also applauded the plan which he claimed called for Hamas to be disarmed, Gaza to be demilitarized and regulates that the Palestinian refugee problem must be solved "outside the State of Israel".
The Palestinian Authority said earlier on Tuesday that the new U.S. Middle East peace plan aims to establish an isolated Palestinian entity in the Gaza Strip. Under the plan, Israel will gain sovereignty over large areas of the occupied West Bank, Jerusalem would be under total Israeli control, and all Jewish settlers in the occupied territory will be allowed to remain in their homes. "Palestine will prevail, and Trump and the deal will go to the dustbin of history", he said. "Moving to the de jure annexation of settlements is something that was given the green light yesterday".
Meanwhile, Trump cautioned that "the conditions for statehood" should be met before the creation of "a contiguous territory within the future Palestinian State", which included stopping "the malign activities of Hamas", ending the incitement of hatred against Israel, among others.
It said Jerusalem's holy sites, sacred to Jews, Christians and Muslims, should be open to worshippers.
Jared Kushner, Trump's son-in-law and the plan's principal architect, shrugged off the Palestinian rejection.
The plan would also allow Israel to immediately annex virtually all its settlements in the occupied West Bank, which are viewed as illegal by the Palestinians and most of the global community.
The proposed deal, which USA officials have touted as a pragmatic and realistic approach to the real situation on the ground, envisions a Palestinian state comprising of several enclaves connected by roads and mostly surrounded by Israeli territory.
The US has signaled that it is happy for Israel's annexation to begin at any time.
Gaza political analyst Talal Okal said the deal gave Israel the right to take what it wanted "immediately, while the Palestinians have to wait four years to see whether they have rights or not".
Amos Yadlin, a former Israeli head of military intelligence said: "This is the most favorable plan for Israel ever presented by an worldwide player". The "carrot" is the promise of a multibillion dollar investment and a promise to freeze construction of Israeli settlements in occupied Palestinian lands for four years.