Mr Netanyahu made the controversial pledge on Tuesday just a week before Israel heads to the polls.
The move represents an apparent attempt to shore up support from hard-line nationalist voters, with the election expected to be closely fought.
Mr Netanyahu is locked in a tight race and has turned to a series of dramatic announcements in recent days as part of a frantic effort to mobilise his supporters.
Mr Netanyahu argued that Israel must lay out its vision as US President Donald Trump prepares to unveil his Mideast peace plan.
Annexing settlements would likely spell the end of any lingering hopes of establishing a Palestinian state alongside Israel.
Mr Netanyahu made no mention of what he would do with the territory’s more than two million Palestinian residents.
Later, rocket fire interrupted a Likud party campaign rally where Mr Netanyahu was speaking in the southern city of Ashdod.
The Israeli military said it intercepted two rockets launched from the Gaza Strip.
After being taken away by security guards, Mr Netanyahu returned minutes later and continued addressing the crowd.
Mr Netanyahu’s announcement was denounced by world leaders.
Chief Palestinian negotiator Saeb Erekat labelled the move “manifestly illegal” and added that annexation could be considered a “war crime” that would “bury any chance of peace”.
Stephane Dujarric, a United Nations spokesman, said the organisation maintains that any Israeli move to impose its administration over the Palestinian territory “would be devastating to the potential of reviving negotiations, regional peace and the very essence of a two-state solution”.
The Arab League also condemned his remarks as “a serious development and an Israeli aggression” that, if carried out, amount to “an Israeli declaration for the end of the peace process”.
Jordan’s foreign minister, Ayman Safadi, said in a statement that annexation of Israel’s West Bank settlements would fan the flames of conflict around the region.
Palestinian president Mahmoud Abbas said all agreements with Israel will be cancelled if Mr Netanyahu presses forward with his plan.
“We have the right to defend our rights and achieve our goals by all available means, whatever the results, as Netanyahu’s decisions contradict the resolutions of international legitimacy and international law,” he said.
Israel has maintained a presence in the West Bank since 1967 but has stopped short of annexation.
Palestine has claimed the entire area for a future independent state but Mr Netanyahu previously insisted Israel would always have a military presence there.
Despite international condemnation Israel has built about 140 settlements in the West Bank and in East Jerusalem which are considered illegal under international law, though Israel disputes this.
Additional reporting from the Press Association
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