Palestinians have demanded the barrier be demolished
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Prime Minister Ariel Sharon has decided how Israel's West Bank barrier will be routed near Jerusalem, officials say.
The barrier will cut East Jerusalem and the largest West Bank settlement off from the rest of the West Bank, and will divide Bethlehem.
Palestinians said the unilateral decision could jeopardise efforts to revive peace talks.
"This is a policy of dictation and not negotiation," said Palestinian negotiator Saeb Erakat.
"This prejudges and prejudices the outcome of permanent status negotiations."
Israel says the barrier is being built to keep out Palestinian attackers, but Palestinians regard it as a land grab.
The route means lands claimed by the Palestinians for a future state will be on the Israeli side of the barrier.
Completion this year
East Jerusalem is especially sensitive, as Palestinians want it as their capital.
Israel has annexed East Jerusalem, though under international law the area is considered to be occupied territory.
Guide to the route and structure of the West Bank barrier

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The plan approved by Mr Sharon and prepared by the National Security Council means the largest West Bank Jewish settlement - that of Maale Adumim - would be encompassed by the barrier, though crossings would be built into it to allow access.
The international community considers all settlements in Gaza and the West Bank, including East Jerusalem, as illegal under international law, though Israel disputes this.
The barrier segment is due to be completed by the end of the year.
The town of Bethlehem will be divided so that the Jewish shrine of Rachel's Tomb is on the Israeli side.
Palestinian demonstrators denounced the plan on Monday, massing outside the government complex in Ramallah in the West Bank where UN Secretary General Kofi Annan was visiting.
They demanded implementation of a ruling by the International Court of Justice in The Hague last year that the barrier is illegal and must be torn down.