Trump's plan was expected to be unveiled at an economic conference in Bahrain this month, but a snap election in Israel complicates things.
Reacting to comments by the U.S. ambassador in Israel, Palestine Liberation Organization Chief Saeb Erekat said Sunday that U.S. President Donald Trump's vision of Palestine was "annexation of occupied territory, a war crime according to international law."
In an interview published Saturday in the New York Times, U.S. Ambassador David Friedman said Israel did not rule out an Israeli move to annex parts of the occupied West Bank, land that the Palestinians seek for a state.
Palestinian chief negotiator Erekat responded on Twitter that he believed such comments were just giving more reasons to boycott the peace workshop in Bahrain scheduled later this month.
The Fatah group also reacted in a statement, asking aloud if "this is the stance of the U.S. administration or the stance of the most radical of settlers."
Israeli non-governmental organization Peace Now called on Trump to fire Friedman. "Ambassador Friedman is a Trojan horse sent by the settler right, which sabotages Israel's interests and the chance for peace. The price will be paid by the residents of the area, not by Friedman or Trump. The U.S. president, if he means to serve as a fair mediator, ought to send Friedman packing this evening."
Israeli Prime Minister Benjamin Netanyahu said in the run-up to an April election that he plans to annex Jewish settlements in the West Bank, a move bound to trigger widespread international condemnation and complicate peace efforts.
The United Nations view Israeli settlements in the West Bank, territory captured in the 1967 war, as illegal. Israel disputes this, citing historical, political and religious ties as well as security needs.
Friedman said that, under certain circumstances, "Israel has the right to retain some, but unlikely all, of the West Bank."
It was unclear which West Bank territories Friedman meant and whether Israel's retention would be part of a peace accord that includes land swaps - an idea floated in past negotiations - rather than a unilateral move such as annexation.
The Palestinian leadership has refused to deal with the Trump administration ever since it recognized Jerusalem as Israel's capital.
In March, Trump recognized Israeli sovereignty over the Golan Heights, territory Israel captured from Syria in the same war and later annexed.
Netanyahu told Army Radio in April that Trump's Golan step showed it was possible to annex West Bank settlements "within a gradual process and I prefer to do so with American recognition."
He added: "I have been discussing the question of extending sovereignty with the Americans for the past six months."