The government says the refugees would have "better access to humanitarian assistance" if they are relocated to the island that rights groups and local officials have described as 'uninhabitable.'
Who are Rohingya refugees and why are they in Bangladesh?
The Rohingya, a Muslim minority in a primarily Buddhist country, are not officially recognised as an ethnic group or as citizens of Myanmar.
They have lived in Myanmar for generations but are viewed as outsiders by the locals who call them "Bengali."
There have even been efforts to stop using the word Rohingya in Myanmar.
The Rohingya use a dialect similar to that spoken in Chittagong in southeast Bangladesh and have been described by the United Nations as the world's most persecuted minority.
Most of the Rohingya live in Myanmar's impoverished western Rakhine state, but are denied basic rights and even face restrictions on movement and work.
Human Rights Watch estimates that between 300,000 to 500,000 Rohingya Muslims — most of them unregistered — have fled Myanmar for Bangladesh since the 1990s.
Close to 65,000 more began arriving in October 2016, escaping what the UN said was the "ethnic cleansing of Rohingya Muslims."
The majority of people who fled to Bangladesh live in "terrible" conditions in refugee camps in Cox's Bazar district, which borders Rakhine state and is home to the country's biggest tourist resort.
The Bangladesh government now wants to move the refugees to a barren island called Thengar Char.
Where is Thengar Char and why is it uninhabitable?
It has been dubbed 'exile island' and Thengar Char certainly fits the bill.
It is flat and featureless, covered by bushes and emerged in the Bay of Bengal around 10 years ago. It is one of several, unstable islands in southeastern Bangladesh that were formed by the build up of sediment. The nearest inhabited island to it is about two hours away.
The 6,000-acre island is completely undeveloped and only accessible during winter. Parts of it are submerged underwater when monsoon rains fall, a local official told AFP on condition of anonymity. Trees were being planted on the island in a bid to shore up land against high tides and flooding, but those efforts were at least a decade away from completion, the official said.
Villagers in the surrounding areas also complain of attacks from pirates who steal boats and kidnap fishermen for ransom.
What's the government's rationale?
The government first discussed the idea of moving refugees to Thengar Char island in 2015 but did not go ahead with the plan after international objection.
It said the resettling of Rohingya refugees on the island would provide them with "better access to humanitarian assistance."
The country's foreign minister, A H Mahmood, said earlier this month that the refugees would only be relocated after the government finished building the necessary infrastructure, including schools and roads.
"[The minister] requested the ... UN and other international partners to render their support in the implementation of this relocation plan by providing assistance in developing the island and in transporting the Myanmar nationals," read a foreign ministry statement, adding that the move was a "temporary arrangement."
It said the refugees bring crime and a risk of disease and were straining resources in one of Asia's poorest countries.
The government expected construction on the island to start last week but has provided no timeline on when the relocation would begin.
What is the reaction to the plan?
The Asia director at Human Rights Watch, Brad Adams, said the government's claim that relocation would make things better for the refugees was "ridiculous."
"This proposal is both cruel and unworkable and should be abandoned."
Government agencies in Bangladesh, like the national weather department, have also said the islands in the Bay of Bengal were "especially risky" to inhabit because "average rainfall during the monsoon season in the coastal areas is more than double that of the other parts of the country."
A local journalist Saleh Noman, who was interviewed by Reuters, said the plan was simply "unrealistic" as "it took some 40 years" for a similar island to be developed.
What do the refugees think of Bangladesh's plan?
"If the government wants something, we will have to obey them. At the end of the day, what we want or don't want is not going to matter to anyone," a refugee told the New York Times.
The community leaders said they were not informed about the decision.