Eitam, of the extreme-right National Religious Party (NRP), said he hoped to convince the Ministerial Committee on Laws to adopt the draft bill as a government proposal.
Were he to fail, his party would then submit the bill directly to the Knesset or Israeli parliament.
"Nowadays, almost 40% of young army officers, starting with the rank of lieutenant colonel, wear the kippa," the skullcap worn by religious Jews, told the Israeli daily Maariv on Tuesday.
"For the army's sake, for that of the State and that of the nation, the Israeli army can no (longer) be involved in such a
sensitive matter which divides the nation and which must be incumbent upon police and border police forces," he added.
Eitam said he came to the conclusion the army should not be drawn into the political debate after numerous discussions with members of military academies, soldiers and religious officers.
"The Israeli army can no longer be involved in a sensitive matter which divides the nation and which must be incumbent upon police and border police forces"
Israeli Housing Minister
The minister was himself the first high-ranking religious combatant officer to head an army unit.
"Israeli society has completely changed since Yamit," he said, referring to the Jewish settlement in Egypt's Sinai desert dismantled by the Israeli army in 1982 following the 1979 peace treaty between Israel and Egypt.
Israeli Prime Minister Ariel Sharon announced earlier this month he planned to evacuate 17 Gaza settlements and other isolated colonies on the West Bank.
The move, proposed to start no later than this summer, is part of the premier's decision to "unilaterally disengage" from peace talks with the Palestinians after he claimed the latter failed to implement their obligations under a US-backed peace roadmap.
Eitam's statements come after an Israeli parliamentary committee approved more than $20 million in new funding for Jewish settlements in the West Bank and Gaza Strip, despite Sharon's recent calls to evacuate parts of these areas.
"At a time when they (Israelis) speak about withdrawing settlements from Gaza, they allocate millions of dollars for settlements throughout the West Bank and Gaza"
Chief Palestinian negotiator
The decision on Monday by the Finance Committee outraged the Palestinians as well as opposition legislators.
It also threatened to complicate a visit this week by senior US diplomats, who are to arrive to discuss peace efforts with Sharon.
"At a time when they speak about withdrawing settlements from Gaza, they allocate millions of dollars for settlements throughout the West Bank and Gaza," said Saib Uraiqat, the chief Palestinian peace negotiator.
Sharon's office declined to comment on the committee's move.
While the US formally remains committed to the road map, American officials have recently indicated they could support Sharon's disengagement plan. Three senior US envoys are due in Israel on Wednesday to discuss Sharon's new plan.
Sharon has been under growing pressure within his government since he began talking of uprooting Jewish settlements.
Two partners, the National Religious Party and the National Union Party, have threatened to pull out of the government if he carries out the plan and have begun to offer more extreme alternatives.