Israel has threatened to annex more land in the occupied West Bank, should Palestinians declare statehood without concluding a peace agreement.

"If the Palestinians take such a unilateral line, Israel should also consider ... passing a law to annex some of the settlements," Environment Minister Gilad Erdan, a close ally of Prime Minister Benjamin Netanyahu, told Israel Radio on Monday.

He also threatened to tighten recently loosened travel restrictions on Palestinians in the West Bank and stop "the transfer of money that the Israeli government currently transfers to the Palestinian Authority."

The remarks were made in response to the Palestinian Authority officials, who intended to seek support from UN Security Council (UNSC) to recognize an independent Palestinian state with Jerusalem Al-Quds as its capital.

Israeli Premier Netanyahu has also warned that any Palestinian step towards a unilateral declaration of independence will be answered by "one-sided Israeli measures."

This is while, Chief Palestinian negotiator Saeb Erekat has argued that the "Palestinians are not going to take any unilateral steps."

"They are seeking in consultation with the Europeans, the Russians, the UN, the African group, the Latin group, the Asian group, others, and the Americans, to see the possibility of having the Security Council pass a resolution to recognize the two state solution on the '67 border," he described.

Israel occupied East Jerusalem Al-Quds during a 1967 aggression and later annexed it. The status of the city is among the thorniest issues of the peace process with both sides claiming it as their future capital.