Egypt has criticised a new Israeli law that gives Jewish people the exclusive right to self-determination, saying it undermined the chances for peace with the Palestinians.

The passage of the Nation State law in the early hours of Thursday morning was hailed by Prime Minister Benjamin Netanyahu as a “defining moment”.

He said at the time: "122 years after Herzl made his vision known, with this law we determined the founding principle of our existence. Israel is the nation state of the Jewish people, and respects the rights of all of its citizens."

But the law was criticised as regressive by the Palestinian Authority and European Union, as well as Jewish groups outside of Israel including the Board of Deputies of British Jews.

REACTION: Board of Deputies, Yachad, AJC criticise Israel's new law

Egypt is one of only two Arab countries in the Middle East to have diplomatic relations with Israel.

Its foreign ministry said in a statement on Saturday: “The Arab Republic of Egypt announces...its rejection of the law passed by the Israeli Knesset on the “national state for the Jewish people” law ... for its ramifications that consecrate the concept of occupation and racial segregation.

“It undermines the chances for achieving peace and reaching a just and comprehensive solution for the Palestinian issue.”

There would also be an impact on the potential rights of Palestinians displaced from their homes following Israel’s establishment in 1948, the statement said.