Avigdor Lieberman, the newest addition to the Israeli Cabinet, said on Sunday that separation was necessary because there was no hope for peace between Israel and the Palestinians.
"Anywhere in the world where there are two peoples and two religions ... there is conflict," Lieberman told Army Radio.
"What we have seen in Cyprus is that since they have that model, there is no terror. There is security. There is no peace but there is security."
Cyprus has been divided into Greek and Turkish sections since 1974. Repeated attempts to unify the Mediterranean island have failed.
Ehud Olmert, the Israeli prime minister, brought Lieberman into his government last week to shore up a shaky coalition.
Lieberman's hawkish views have raised concerns throughout the world that he will use his powerful post as minister for "strategic threats" to block any attempts to pursue peace with the Palestinians.
His views have been compared to far-right politicians in Europe such as Joerg Haider and Jean-Marie Le Pen.
In the interview, Lieberman repeated his view that Israel should strip Arab citizens living near the West Bank of citizenship and place them under Palestinian jurisdiction.
Arabs permitted to remain in Israel would have to take a loyalty test or risk losing their citizenship, he said.