The company announced in November it would remove around 200 listings from the area, which is claimed by Palestinians as territory for a future state.
On Tuesday Airbnb said it will now allow properties in Israeli settlements to be listed, but will donate all profits from properties in the West Bank to humanitarian aid organisations.
Israeli settlements in the West Bank are considered illegal by most world powers.
“Airbnb’s decision to support hosting in illegal West Bank settlements is outrageous,” Ryvka Barnard, from the War on Want charity, told The Independent. “Dropping a few coins into a charity box does not make up for war crimes.”
She added: “Settlements are illegal under international law. They violate the fourth Geneva convention, amounting to a war crime. Abiding by international law is not optional, and making donations to somehow try to cancel out those violations, as Airbnb intends to do, is insulting to the Palestinians suffering from such violations, and makes a mockery of international law.”
“This is a huge mistake by Airbnb who has now put its reputation on the line, and will rightly be targeted in the same way businesses seeking to profit from apartheid South Africa were.”
Ben Jamal, director of the Palestine Solidarity Campaign, said Airbnb’s decision was “frankly insulting”.
“With this disgraceful decision, Airbnb have utterly failed the Palestinian people.”
Human Rights Watch said: “Donating profits from unlawful settlement listings, as [Airbnb] promised to do, does nothing to remedy the human suffering they have acknowledged that their activities cause.
“By continuing to do business in settlements, they remain complicit in the abuses settlements trigger.”
But others celebrated the news, including Nitsana Darshan-Leitner, the director of a Tel Aviv-based Israeli advocacy group, who said: “The policy Airbnb announced last November was abject discrimination against Jewish users of the website.
“We commend Airbnb for recognising that it had landed on the wrong side of this issue and changing the policy.”
Airbnb’s decision in November led to it being sued in the US by 12 dual American-Israeli citizens who own homes in the settlements.
Under the plan, Airbnb users could still book about 20,000 properties in Israel and there would still have been listings in other disputed areas such as East Jerusalem and the Golan Heights.
Announcing a resolution to the case, the company said it “will not move forward with implementing the removal of listings in the West Bank from the platform”.
“But Airbnb will take no profits from this activity in the region,” the company said in a statement posted on its website, implying it would not distinguish between Israeli settlement listings and Palestinian listings in the West Bank.
“Any profits generated for Airbnb … will be donated to non-profit organisations dedicated to humanitarian aid that serve people in different parts of the world.”
Israel captured and annexed the West Bank and East Jerusalem in the 1967 Six-Day War. More than 400,000 Israeli settlers live in the West Bank, in addition to about 200,000 Israelis in East Jerusalem.