Israel's separation barrier in the West Bank cannot run in wide loops around Israeli settlements to allow for their expansion, the country's Supreme Court ruled yesterday in an order hailed by a lawyer for Palestinian villagers as a precedent-setting victory.

Israeli officials say the barrier, two-thirds complete, is designed to keep out Palestinian attackers, including suicide bombers.

The Palestinians and Israeli critics charge that the barrier is part of a land grab. They say that in many areas the route was not determined by security needs, but by Israel's desire to incorporate as many settlements as possible on the Israeli side and to allow for their expansion.

Yesterday's ruling came in the case of Bilin, a West Bank village that has become a symbol for Palestinian opposition to the barrier with weekly protests and clashes between villagers and Israeli troops. Bilin has lost half its land, or 500 acres, to the barrier and to the Modiin Illit settlement, home to 40,000 people and expanding rapidly. Last year, the high court ruled that Israel's government must move the Bilin barrier westward, saying its location had little to do with making the settlement more secure and a lot with giving it more land.

Yesterday, the court rejected the latest route proposal and said the state must come up with a more appropriate path, in line with the court's criteria.

"Security considerations that will shape the new route must only take into account houses that have already been built and not plans for future construction," the court said, referring to arguments by state planners that they need a buffer zone between settlements and the barrier.

The Defense Ministry's spokesman was not immediately available for comment.