Israel's West Bank settlements are a central point of contention in the dynamics of the Israeli-Palestinian conflict. Overall, however, their rapid proliferation has been generally understood through the lens of an ideologically centered approach that highlights, specifically, the centrality of the national religious settlers' movement. Against this background, the article focuses on the overlooked reality of large, state-sponsored suburban settlements – and in particular on the role of the Israeli Ministry of Housing in their establishment between the mid-1970s and the early 1990s. Building on contributions in the field of political economy and political geography, we conceive the actions of the Ministry in the occupied West Bank as a result of a broader strategy of spatial restructuring. By considering both economic and political imperatives underlying this strategy, our analysis offers a more comprehensive assessment of the factors behind Israel's settlement policy. Drawing on a broad range of empirical sources, from archival material to in-depth interviews with Israeli planners, we argue that the proliferation of settlements has been largely the outcome of a process of metropolitanization – i.e. of the dynamics of urban development of Israel's main metropolitan centers and the adoption of a new, post-Keynesian policy paradigm based on market-oriented economic development. This process has constituted a major factor for the settlements' growth and, ultimately, in the emergence and naturalization of a new territorial configuration in the area of Israel/Palestine.