In a report compiled by a Justice Ministry team, Attorney General Menachem Mazuz says the government should "thoroughly examine" applying the protocol which governs the treatment of civilians in occupied land.
Published in Tuesday's Haaretz daily, the report was commissioned in the wake of a non-binding ruling in July by the International Court of Justice on the illegality of Israel's West Bank separation barrier.
But Israel has refused to apply the convention in the West Bank and Gaza Strip, arguing they were not sovereign territories before their seizure in the 1967 Six Day War.
At the moment, Israel refers to the areas as "disputed territories".
"The real reason that Israel has so far drawn back from this text is that it never wants to acknowledge that the territories are occupied and that the settlements are forbidden," said Moshe Negbi, legal affairs expert for Israeli Public Radio.
Israeli Prime Minister Ariel Sharon caused a political storm in May last year when he used the term "occupation" in an address to deputies from his Likud party.
"You may not like the word, but what's happening is occupation," he had said.
"The real reason that Israel has so far drawn back from this text is that it never wants to acknowledge that the territories are occupied and that the settlements are forbidden"
Legal expert Moshe Negbi, Israeli Public Radio
However, he was later forced to backtrack, saying he had been misunderstood. After being contacted by then attorney general Elyakim Rubinstein, Sharon instead referred to the territories as "disputed".
Yuval Steinitz, chairman of parliament's foreign affairs and defence committee, reacted angrily to Mazuz's recommendation - saying the issue was beyond the scope of the attorney-general and his team.
"Mazuz is in no position to measure the international and security consequences of his recommendations.
"This should not be determined by a legal perspective as Israel has to take into consideration a number of other criteria," Likud member Steinitz told public radio.
Matan Vilnai, a senior MP with the main opposition Labour party, also voiced reservations about the report's recommendations.
"The recommendations must obviously be studied but I wouldn't rush to accept them as it could cause serious military problems," he said.
Mazuz has already warned that the world court ruling, which the Sharon government has pledged to ignore, could lead to the imposition of sanctions by the international community.
The ICJ, the United Nations' top legal body, said parts of the barrier built inside the West Bank were illegal and should be torn down, a ruling which has been endorsed by the UN General Assembly.
The Justice Ministry has refused to comment on the Mazuz report.