"This is a brazen attack on media freedom in Israel and the Occupied Palestinian Territories," Magdalena Mughrabi, Amnesty's deputy Middle East and North Africa director, said in a statement on Monday.
The sharp criticism came a day after Ayoub Kara, Israel's communications minister, proposed closing Al Jazeera's office in Jerusalem, revoking press credentials of the network's Arabic and English journalists there and shutting down Al Jazeera's cable and satellite transmissions.
"Al Jazeera denounces this decision made by a state that claims to be 'the only democratic state in the Middle East'," the network said in a statement, adding that Kara's reasons used to justify such a move were "odd and biased".
Amnesty said Israel "joins a host of other countries in the region, including Saudi Arabia, which have demanded the channel's closure in the wake of a dispute between Gulf countries and Qatar".
The crisis in the Gulf began on June 5 when Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut ties with Qatar, accusing it of supporting "terrorism". Qatar has vehemently rejected the allegations as "baseless".
On June 22, the Saudi-led group issued a 13-point list of demands, including the shutdown of Al Jazeera. Qatar has dismissed the list and rights groups have called the demand to close Al Jazeera an "unacceptable attack".
Amnesty called on Israel to "halt any attempt to silence critical media".
"All journalists should be free to carry out their work without facing harassment or intimidation," the rights group said, adding that Israel's move was a "repressive clampdown on freedom of expression".
Israeli Prime Minister Benjamin Netanyahu has repeatedly called for Al Jazeera's closure.
Amnesty's criticism follows condemnation by the Committee to Protect Journalists and the Association for Civil Rights in Israel.
"Censoring Al Jazeera or closing its offices will not bring stability to the region, but it would put Israel firmly in the camp of some of the region's worst enemies of press freedom," CPJ's Middle East and North Africa programme coordinator, Sherif Mansour, said in a statement on Monday.
Following the Israeli minister's announcement on Sunday, it remains unclear what the next steps will entail.
The director of Israel's government press office, which issues press credentials to journalists, said it would not distribute press cards if it believed that would endanger state security.
The blocking of the Al Jazeera network from broadcasting through cable and satellite companies requires special legislation.
The closure of Al Jazeera's offices has recently been a contentious subject between Kara and Gilad Erdan, the Israeli public security minister, who deflected the issue to police. Police reportedly advised Erdan back to the communications ministry.