"The secretary-general is alarmed by yesterday's announcement by Israeli authorities to declare as so-called 'state land' nearly 1,000 acres of land in the Bethlehem area of the West Bank," Xinhua quoted a statement by Ban's spokesperson as saying.
The UN chief called on Israel to heed the calls of the international community to refrain from settlement activity and abide by its commitments under international law and the Quartet Road Map.
"The seizure of such a large swathe of land risks paving the way for further settlement activity, which -- as the United Nations has reiterated on many occasions -- is illegal under international law and runs totally counter to the pursuit of a two-state solution," the UN statement said.
Israeli authorities announced on Sunday that a land of 4,000 dunam (4 square km) used as a settlement in the West Bank would be turned into state land and that the government would acknowledge it as a new Israeli community.
There is no ownership claimed by Palestinians over these specific lands, Israeli authorities said, adding that there will be a period of 45 days, in which objections against the decision could be filed.
The decision was made following the kidnapping and murder of three Israeli teenagers at the same area in June when Israeli Defence Minister Moshe Ya'alon said a new settlement will be established in the area.
West Bank settlements are considered illegal by the international community and prevent a territorial continuity to the Palestinian territories in the West Bank.
Israel occupied the West Bank during the 1967 Mideast War and annexed east Jerusalem where are slated to be part of a future Palestinian state.
In June, following the establishment of a Palestinian unity government, Israel announced in response the immediate marketing of 1,500 new housing units in the settlements.