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Finance Minister Bezalel Smotrich will have the power to direct that Palestinian homes in Israeli-administered Area C, which makes up the majority of the West Bank, be destroyed.
Benny Gantz and Bezalel Smotrich, two key ministers currently allied with Benjamin Netanyahu, have publicly opposed any ceasefire with Hamas in Gaza.
The news comes amid the new government’s fresh assault on the Israeli judicial system.
The decision was slammed by Israeli Prime Minister Netanyahu's far-right coalition, which vowed to push ahead with controversial measures that would weaken the Supreme Court and its power to strike down legislation.
The UN extended its mission in the Golan Heights as Israel continues its land grabs in southwestern Syria, where injuries and arrests have been reported.
The demonstration is the biggest since Netanyahu's new government took power in late December in Israel.
Many in Israel fear that the proposed reforms will threaten to destroy Israel's judiciary.
Benjamin Netanyahu's Likud party received the highest number of seats for the first time since the Gaza war began, as his military bombards Lebanon.
Analysts say that Netanyahu's new government will be the most right-wing in Israel's history.
Netanyahu is reportedly closer toward establishing Israel's most far-right governments ever.