Foreign Secretary William Hague has criticised Israel's new anti-boycott law, calling it an "infringement of freedom of expression".
Mr Hague also said he would reserve Britain's position on whether or not to support the declaration of a Palestinian state at the UN in September as a bargaining chip to persuade both sides to return to peace negotiations.
Speaking at Foreign Office Questions on Tuesday, Mr Hague said: "The government in no way supports boycotts but is concerned about this law, which infringes on the legitimate freedom of expression."
His comments came in response to a question from Labour MP Sir Gerald Kaufman, who asked the Foreign Secretary to "join the very many Jewish supporters of Israel in Britain, the United States and Israel itself in expressing utter disgust at the legislation".
Labour MP Richard Burden challenged Mr Hague to reveal his position on the declaration of a Palestinian state, saying: "Israel has rightly been recognised as a full member of the UN, with internationally recognised borders… That has not been seen as an impediment to a negotiated settlement… In that case, what is the problem with recognising Palestine as a full member of the UN?"
Mr Hague said he had discussed the matter with Quartet Middle East envoy Tony Blair, and said he was hopeful that the Quartet would release a statement in the coming weeks which will be a basis for resuming negotiations.
Conservative MPs Robert Halfon and Bob Blackman cautioned against UN recognition of a Palestinian state while Hamas rocket attacks were ongoing.
Mr Hague said later he was "extremely disappointed" at the approval of 300 new housing units to be built in the West Bank.