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Israel signed an agreement with China on Sunday to bring in 6,000 Chinese construction workers as the country seeks to address a housing shortage contributing to high property prices.
However, Israeli media reports said Israel had acceded to Chinese demands that the labourers not work in Jewish settlements in the occupied West Bank.
Israeli officials did not comment directly on the report, saying only that the two sides had agreed on locations where the labourers would work.
The agreement was signed in Jerusalem by Israeli Housing Minister Yoav Galant and Chinese International Trade Representative and Vice Minister of Commerce Fu Ziying, a spokesman for the minister said.
Prime Minister Benjamin Netanyahu had reached agreement on broad outlines of the deal during a visit to China last month, the spokesman said.
Growing housing costs have become an important issue in Israel, provoking a wave of protests in 2011.
Labour shortages have exacerbated the problem, and several thousand foreign labourers have already been brought in to increase manpower.
Israeli settlements in the West Bank are seen as illegal under international law and major stumbling blocks to peace as they are built on land the Palestinians see as part of their future state.
A UN Security Council resolution in December that condemned Israeli settlements by a vote of 14-0 included China voting in favour.
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