The Trump administration said on Monday that it no longer considers Israeli settlements built in the occupied West Bank as illegal, the latest in a series of moves by the Trump administration that reversed decades of US policy.

US Secretary of State Mike Pompeo said the administration of President Donald Trump will no longer abide by a 1978 State Department legal opinion that the settlements were "inconsistent with international law".

"After carefully studying all sides of the legal debate, this administration agrees ... (the) establishment of Israeli civilian settlements in the West Bank is not, per se, inconsistent with international law," Pompeo said.

The move sparked a wave of condemnations by international rights groups and Palestinian diplomats who said the announcement contravenes international law and UN resolutions.

Meanwhile, Israeli Prime Minister Benjamin Netanyahu said the US announcement "rights a historical wrong".

Israeli settlements are illegal under international law as they breach the Fourth Geneva Convention, which prohibits an occupying power from transferring its population to the area it occupies.

The settlements are also considered a major stumbling block to a two-state solution to the Palestinian-Israeli conflict.

More than 600,000 Israelis currently live in settlements in the occupied West Bank, including occupied East Jerusalem. Some three million Palestinians live there.