Israel has stepped up its expansion of settlements in the Palestinian territories since the inauguration of Trump, who is perceived as sympathetic to settlement building.
But China's concerns about the new Trump administration appear to have been somewhat calmed by comments regarding the South China Sea made by Defense Secretary Jim Mattis.
Israeli settlements in the occupied West Bank and East Jerusalem remain illegal under global law.
Israeli Prime Minister Benjamin Netanyahu has already announced plans for an additional settlement, prompting a stern response last week from the Trump administration.
The vote on the legalization bill, which passed 60-52, comes days before a February 15 meeting between Netanyahu and President Trump at the White House.
Top of the list of differences are Israeli settlements, built on occupied land in contravention of global law, though that is disputed by Israel.
"Iran seeks to annihilate Israel", Netanyahu stressed.
Benjamin Netanyahu to hold talks with Theresa May
Crucially, Israeli MPs have voted for a law whose principal impact will be on Palestinian landowners who have no say in electing those MPs, and to whom the wider Israeli political system is in no way democratically accountable. "This isn't the Israel we want to see". This Bill aims at transferring 12 settlement outposts, where around 4,000 settlement units are established, into new settlements and paving the way for the annexation of Areas C, which is around 62% of the total West Bank area.
In addition to the unauthorized outposts, there are some 120 Jewish settlements Israel considers legal.
The White House said last month that Trump emphasized "the deep and abiding" partnership between the two countries and that he "affirmed his unprecedented commitment to Israel's security". "However, it is imperative that the Knesset recognizes that passing this law will be harmful to Israel's image internationally and could undermine future efforts to achieving a two-state solution". ADL CEO Jonathan A. Greenblatt said in a statement.
Critics say that Mr Trump has a history of wavering over this issue and lacks the experience to conduct the tough negotiations that would be necessary to secure a peace deal.
It passed despite Attorney-General Avichai Mandelbilt's opposition to the law who reportedly refused to defend it against legal challenges, arguing it could increase the chances of Israel being investigated by the International Criminal Court.
United Nations envoy for the Middle East peace process Nickolay Mladenov said Monday he was "concerned" by the bill as it would "enable the continued use of privately owned Palestinian land for Israeli settlements".
Meridor, a lawyer, warned the Israeli parliament that the West Bank remains under a "belligerent occupation", 50 years after Israel won the territory from Jordan in the 1967 Arab-Israeli war.
Cheltenham's spring and summer highlights
The beautiful Cotswolds spa town of Cheltenham has enjoyed a great reputation for attracting visitors to its wide range of festivals.