The bill passed with 57 lawmakers voting for the bill and 51 against.
The Knesset on Wednesday passed a bill that legalises about 4,000 illegal settler homes in the West Bank, Palestinian territory which has been under military occupation by the Israeli army since 1967.
The international community regards all of the settlements as illegal, because they violate the Geneva Convention on civilians living in territory occupied by another country's army. Despite this, about 400,000 Israelis live in the West Bank, and another 300,000 live in East Jerusalem.
Palestinians condemned the bill's passage.
"I have so many memories here. I've lived on this land since I was seven, I've lost two of my sons but losing my land and just watching it be stolen from me hurts my heart even more," said Mariam Hasan Abdul-Kareem, a Ramallah resident.
TRT World's Sarah Jones reports.