Israel expanded on Wednesday its policy of stripping citizenship over "terrorism" offences, with the parliament announcing lawmakers had passed legislation targeting those who receive funds from the Palestinian Authority.
The bill, which passed with 94 votes in favour and 10 against in the Knesset, also paves the way for Israel to expel people from the country or annex east Jerusalem.
Hawkish Israeli Prime Minister Benjamin Netanyahu, who recently announced an increase in illegal settlement activity in the occupied West Bank, hailed it on Twitter as "our answer to terrorism".
A statement from parliament said lawmakers had approved "the revocation of citizenship or residency of a terrorist operative who receives compensation (from the PA) for committing an act of terrorism".
The Palestinian Authority gives stipends to the families of numerous prisoners, or detainees themselves, including those convicted of killing Israelis.
Palestinians say that such payments are a key source of income in the occupied territories where poverty is rife.
Adalah, an organisation that advocates for Palestinians' rights in Israel, said the law "not only creates an additional avenue for the revocation of the citizenship of residency of Palestinians under the Israeli regime, but also facilitates their expulsion".
"The law explicitly and exclusively targets Palestinians as part of Israel's entrenchment of two separate legal systems based on Jewish supremacy," the group charged in a statement.
The law may affect hundreds of east Jerusalem Palestinians and dozens of Arab citizens of Israel, according to Dani Shenhar, head of the legal department at Israeli rights group HaMoked.
"The threshold is very low, so we're very worried about it, especially the effect on east Jerusalem," he told AFP when the bill was tabled last month.
The text approved by lawmakers lays out a judicial procedure for denying legal status following a request by the interior minister.
Most Palestinians living in east Jerusalem hold Israeli residency permits rather than citizenship.
The new legislation allows deportation "to the territories of the Palestinian Authority (in the occupied West Bank) or the Gaza Strip".
Gaza, controlled by Hamas, has been under an Israeli-led blockade since 2007, leading to high levels of poverty, unemployment and a lack of medical supplies.
Israel has occupied the West Bank and east Jerusalem since the 1967 Six-Day War.
Ahmad Tibi, an Arab opposition lawmaker, denounced the law as discriminatory.
"When an Arab commits a crime, they are a conditional citizen, whereas when a Jew commits even a more serious crime, revoking their citizenship is unheard of," he said during Wednesday's debate in parliament.
Lawmakers on Wednesday also approved in a preliminary vote a bill to allow the deportation of family members of those convicted of "terrorism", in cases in which they are found to have supported the crime or known about it and failed to report it to the authorities.
Israel has previously stripped residency and citizenship, including that of French-Palestinian lawyer Salah Hamouri who was deported in December.
The Jerusalem resident had been arrested and jailed on several occasions by Israel, which revoked his residency permit citing ties the outlawed Popular Front for the Liberation of Palestine.
Human Rights Watch said Israel has stripped 15,000 occupied east Jerusalem Palestinians of their right to residency since 1967, warning the practice may constitute a "war crime".