Major-General Yair Naveh, head of the army's central command, signed an order last week that will, for the first time, allow anyone moving trailers or taking other steps to establish an outpost to be prosecuted.
The instructions were issued by the attorney-general and approved by defence chiefs, an Israeli military source said on Tuesday.
"The head of central command is in charge of this area, so this order gives more authority to local courts in Judea and Samaria," the source said, using the Biblical term for the West Bank.
"For the first time, Israelis who don't obey this order in Judea and Samaria will be able to be brought to civilian courts," she said, adding that the order has been effective since 30 June.
Until now, courts inside Israel have not had the jurisdiction to prosecute such actions but the new order grants greater authority to civilian courts in settlements in the West Bank to prosecute offenders, the source said.
The army has largely ignored such outpost building, which often involves Israelis entering closed military zones.
The Yediot Aharonot daily said the prosecutions would be handled by courts in three of the largest West Bank settlements: in Ariel, Maale Adumim east of Jerusalem, and in Kiryat Arba in Hebron.
Jewish settler groups have fiercely opposed Israel's proposed withdrawal this summer from Gaza and parts of the West Bank, which have been occupied by Israel since 1967.
"I oppose any restrictions on Jewish people to build or settle anywhere in the land of Israel which was given to the Jewish people by God. I believe the law of the Torah outweighs the jurisdiction of the state of Israel"
David Ha'ivri, chairman of Jewish settler group Revava, told Aljazeera.net that Tel Aviv has no right to issue the order.
"I oppose any restrictions on Jewish people to build or settle anywhere in the land of Israel which was given to the Jewish people by God. I believe the law of the Torah outweighs the jurisdiction of the state of Israel."
Ha'ivri also said the internationally backed road map peace plan between Israel and the Palestinians would not achieve the desired results.
"I don't believe the road map will lead to peace with the Palestinians. It is a delusion, a lie. There can be no peace by giving away land to the Palestinians."
However, Khalid Amayreh, Aljazeera's correspondent in the West Bank, said the Palestinians would not view the Israeli decree as a significant development.
"I think Palestinians will see this as a token measure and it shouldn't be seen as a landmark ruling," he said.
Some settlers have decided to
leave before the planned pullout
He added that some Palestinians would likely see the move as a bid to impress the international community, and to show it that the Sharon government will get tough with the settlers.
The Israeli order was given in light of the publication in March of the Sasson report on outposts.
The document, drawn up by former justice ministry official Talia Sasson, concluded that government ministries had either turned a blind eye to or handed out millions of dollars to help finance and build scores of settlements in the West Bank.
Outposts are generally set up as makeshift settlements with caravans but are often later "legalised" by the authorities.
Under the terms of the Middle East peace road map, the Israeli government is obliged to dismantle all unauthorised outposts that have been erected in the West Bank since Prime Minister Ariel Sharon took office in March 2001.
The international community considers all Jewish settlements in the occupied territories illegal.
There are more than 400,000 Jewish settlers living on occupied Arab land in East Jerusalem, the West Bank and Gaza.