PLO official Hanan Ashrawi on Sunday condemned the European Union's decision to delay the labeling of settlement products following a request from US Secretary of State John Kerry.
"This once again brings into question the American role in negotiations as a credible mediator," Ashrawi said in a statement.
"Rather than providing Israel with immunity, the Obama administration should act responsibly and promote prospects for a just peace and Palestinian self-determination and freedom."
The senior PLO official said the EU should go further than simply labeling settlement products by enforcing a "serious ban" on their sale.
"The US has used the so-called peace process as an instrument of Israeli impunity; it is about time to end such a policy."
EU foreign ministers from 27 member states agreed over a year ago to enforce EU legislation and label products originating from illegal settlements in the occupied West Bank.
On February 22, EU foreign policy chief Catherine Ashton called on EU foreign ministers to enforce legislation on labeling settlement goods and in April, 13 EU foreign ministers expressed support for the initiative, with the issue currently in discussion.
US Secretary of State John Kerry and senior US officials reportedly asked Ashton to delay enforcement of the proposal, with the Americans saying that it would harm Kerry's efforts to restart peace talks.
A senior Israeli official told the Israeli daily that Israel had asked the US administration to intervene to delay the EU's decision to follow through on labeling settlement products.
The decision to label settlement goods will likely be delayed until June.