It will send a letter to the International Court of Justice that sets out its arguments for constructing the barrier, said political sources on Sunday.
The barrier slices off some of the most fertile parts of the occupied West Bank and separates thousands of farmers from their land. At some parts it reaches 10 metres.
The decision came after a meeting on Sunday between Israeli Prime Minister Ariel Sharon and top ministers, where possible changes to the route were also discussed in an effort to justify its construction in court.
Israel claims the wall is necessary to keep out Palestinian resistance fighters spearheading an Intifada against Israel's continued occupation. But Palestinians fear it will demarcate the borders of a future Palestinian state.
The barrier has attracted international criticism, including from Israel's staunch ally, the United States.
The wall has failed to halt resistance attacks against Israeli targets.
Two Jewish settlers were also wounded when Palestinian resistance fighters opened fire on the car they were travelling in, reported Aljazeera's correspondent.
Sunday's incident occurred near the Nafia Tsouf Jewish settlement close to the West Bank city of Ram Allah.
Israeli military sources, who reported only one settler injured, said he was hit in the chest and the shoulder.
It was not clear what happened to the attackers but the army confirmed that the body of a male Palestinian had later been found near the scene of the shooting.
An army spokesman denied that soldiers could have been responsible for his death, insisting they had not opened fire.
In Nablus Israel detained a top leader of the Palestinian resistance movement Islamic Jihad, according to Israeli and Palestinian sources.
Ahmad Bsis, 27, head of the al-Quds Brigades, the armed wing of Islamic Jihad, for the northern West Bank was arrested in Nablus on Sunday by a special Israeli army unit disguised as civilians.
The army said he was wanted for planning and involvement in resistance attacks against Israel.