A panel voted to repeal the 2017 measure, under which settlers could remain on land if they built there without prior knowledge of Palestinian ownership, or if homes were built at the state's direction. Eight voted in favour and one against.
Although the left in Israel is no match for the dominant right, it has managed to generate some resistance to Netanyahu's reckless ambition.
The plan offered up to the United States, Russia, the United Nations and the European Union includes a "sovereign Palestinian state, independent, and demilitarised" with "minor modifications of borders where necessary".
Demonstrators waved Israeli and Palestinians flags and held placards against the occupation of the West Bank and the possible annexation of parts of it.
Palestinians are vocal in their opposition to US President Donald Trump's Middle East plan, which gives Israel the green light to annex Jewish settlements and other strategic territory in the West Bank.
The Naksa or "the day of the setback" refers to the annual observance of the 1967 war in which Israel invaded Gaza, the West Bank and East Jerusalem, resulting in the displacement of thousands of Palestinians from their homes.
Settler leaders from the occupied West Bank voiced concern that Donald Trump's annexation map will leave many settlements as isolated enclaves, saying the US president was not a friend of Israel.
The Palestinians' official news agency Wafa identified the dead man as Eyad Hallak, a resident of the Wadi Joz neighbourhood of occupied East Jerusalem with special needs.
Former US vice president told an online fundraiser by members of the Jewish community in the US that he was opposed to the move.
President Mahmoud Abbas declares end to "agreements and understandings" signed with Israel and US, and turns over responsibility of occupied territories back to Israel, in response to Israel's plan to annex parts of occupied West Bank.
The settler faces a potential life sentence for killing a couple and their baby in a 2015 arson attack. Palestinians complain the court was sluggish in reaching a verdict, unlike the speed with which they process cases involving Palestinian suspects.
The catastrophe that Palestinians first faced 72 years ago seems to only worsen with time.
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