The PM added that while his country would continue to accept refugees from conflict zones, "we cannot let tens of thousands of illegal workers infiltrate into Israel through the southern border and inundate our country with illegal aliens".
Illegal labour immigration
Alon Liel, a professor at the University of Tel Aviv and former director-general of the Israeli ministry of foreign affairs, said the wave of illegal labour immigration is Israel's "most worrying" issue.
"Once they are here, its very difficult to expel them. It's creating a social problem," he told Al Jazeera.
"Along this border, the issue of labour immigrants is number one.
Number two is security and number three is smuggling. If you put the three together you understand the worries."
But he also said the construction of another wall would not be "a very pleasant feeling" for Israelis.
"About 50 to 60 per cent of our borders are already sealed. We are surrounded by fences along our border with Lebanon, Jordan, most of the West Bank, all of Gaza.
"It's a very unpleasant feeling, but for the Israeli public the alternative to not having a fence seems worse."
The project will cost $270 million and take two years to complete, but the barrier will not be erected along the whole border - which is 266 km long.
Egyptian security sources in North Sinai said Israel had not informed the Egyptian authorities of its plan.
One security source said the project was an internal Israeli matter "which Egypt has nothing to do with as long as the fence is built on Israeli soil".
Egyptian Foreign Ministry spokesman Husam Zaki said the ministry would issue a statement on the plan on Monday.
Egyptian police have stepped up efforts in recent months to control the frontier with Israel following an increase in human trafficking through Egypt.
At least 17 migrants have been shot dead as they tried to enter Israel by Egyptian police since May 2009.
The wall along Israel's southern border is separate from a 670km barrier that cuts off Israel from large parts of the West Bank.
Israel has said that wall, much of which was built on Palestinian land, is designed to keep out suicide bombers, but Palestinians say it is an Israeli land grab.
The announcement of the wall at Israel's southern border comes after increased tensions among Palestinians over another wall, on the Rafah border with Egypt.
Egypt says it is constructing the wall along its border with the Gaza Strip to defend against threats to national security.
That barrier is believed to consist of a series of steel sheets and pipes that will be buried deep into the ground to prevent the construction of smuggling tunnels under the 14km frontier.
Israel has repeatedly complained that Egypt has not done enough to prevent smuggling into Gaza through such tunnels, which it says are used to supply Hamas with explosives and arms.
Al Jazeera's Ayman Mohyeldin, reporting from Gaza, said the construction of such walls "paint a grim picture" for the people in Gaza.
"Last week when the tensions on the Egypt-Gaza border began to rise as a result of the increased speculation of Egypt's construction of this wall, people here [became] extremely anxious," he said.
"You juxtapose that in terms of the humanitarian aspect coupled with the daily airstrikes and you get a very explosive situation in Gaza."