At stake are thousands of donoms of land belonging to Palestinians who live in the West Bank and are now unable to access their land due to Israel's separation barrier.
The decision, reached by the Ministerial Committee for Jerusalem Affairs in June of 2004, and approved by Prime Minister Sharon and his attorney-general a month later, has not been publicised until now.
By some estimates, the total land to be expropriated could add up to half of all East Jerusalem property.
The move is based on the Israeli Absentee Property Law of 1950, which holds that assets of Jerusalemite Palestinians who were in the West Bank and Gaza Strip at the time of the 1948 War would be expropriated by the state of Israel, without the absentee being eligible for compensation.
Palestinian claims to Jerusalem
are being steadily eliminated
The law, which applied to millions of Palestinian refugees who were unable to return to their homes after the 1948 war, has not been applied to West Bank residents with property in East Jerusalem until now.
The decision is the latest in a series of measures by the Israeli government apparently aimed at eliminating Palestinian claims to Jerusalem and ultimately predetermining the future status of the city.
According to the Israeli Human Rights group B'tselem, the development of East Jerusalem, since its illegal annexation in 1967, has been based on political considerations designed to strengthen Israeli control over the city, by creating a decisive majority of Jews.
By all accounts, the Israeli ministry of interior is using land expropriations, identity-card seizure, exorbitant taxes and difficult-to-obtain building, family-reunion and residency permits to slowly force Palestinian residents out of the city.
A law passed by former prime minister Benjamin Netanyahu's government in the late 1990s, declared that any Palestinian who has not lived in the city for seven continuous years loses his residency rights, for example.
The Netanyahu law, whose time limit has since been changed to three years, does not apply to Israeli Jews.