The Trump administration has dropped any reference to the Golan Heights as being “occupied” by Israel in its latest Global Human Rights Report.
The State Department said the area was "Israeli-controlled", in a yearly report that outlines the human rights situation around the world.
For the second year, the report also does not use the word "occupied" in the sections relating the West Bank and Gaza.
The State Department said it did not consider this phrasing to represent a policy change, saying the report focuses on human rights rather than legal issues.
The US ambassador to the Bureau of Human Rights, Michael Kozak, said “occupied” was not a human rights term.
Israel captured the West Bank, Gaza Strip and Golan Heights in the 1967 Middle East war.
Many UN resolutions have declared Israel's occupation of Palestinian territories to be illegal.
UN Resolution 2334 adopted in 2016 states that Israeli settlement activity is a "flagrant violation" of international law and has "no legal validity".
Hanan Ashrawi, a member of the Palestine Liberation Organisation’s executive committee, said that “complicity in Israeli crimes is criminal” in a tweet that tagged US Secretary of State Mike Pompeo and the US special representative for international negotiations, Jason Greenblatt.
The US State Department said: “Authorities subjected non-Israeli citizens in Jerusalem and the Israeli-controlled Golan Heights to the same laws as Israeli citizens.”
US President Donald Trump moved the US Israeli embassy from Tel Aviv to Jerusalem last year, prompting weekly Friday protests on the Gaza Strip.
Mr Trump also stopped funding the UN aid agency supporting Palestine.
In March, the State Department said it would merge its Palestinian mission with the Israeli embassy. The Trump administration also closed Palestine's office in Washington.
Israel has been lobbying the Trump administration to recognise the annexed Golan Heights as Israeli territory.
But a senior US official told The National that any such decision would be made by Mr Trump, who has not yet done so.
Last January, National Security Adviser John Bolton discussed the annexation of Golan on his trip to Israel and meeting with Prime Minister Benjamin Netanyahu, who urged Mr Bolton to officially recognise Israel's sovereignty of the area.
Although his tour of the Golan was cancelled Because of poor weather, other senior US political figures have visited in recent months.
Several bills are also due for a vote in Congress to recognise the area as Israeli territory.
Undisputed control of the region would give Israel a better chance to stop its main enemies, Iran and Hezbollah, from entrenching themselves there.
Israel's army said yesterday that it uncovered a unit from Hezbollah across the ceasefire line in the Syrian Golan Heights.
The unit, it claimed, was led by a commander who had been jailed over an attack on US forces.
With President Bashar Al Assad regaining control of southern Syria with the help of Russia and Hezbollah's backer Iran, Israel is concerned a front could be established there.
Hezbollah, from neighbouring Lebanon, has also supported Mr Al Assad in Syria's civil war.
The group is among Israel's main enemies and the two fought a war in 2006.
The State Department’s annual report also heavily criticised Iran for contributing to human rights abuses in Syria through its military support for Mr Al Assad and Hezbollah forces.
It also decried Iran's aid to Iraqi militia groups and its support for the rebels in Yemen, where it directed authorities in Houthi-controlled areas to harass and detain Bahais because of their religious affiliation.
The report singled out the Iraqi Popular Mobilisation forces, and said “civilian authorities did not maintain effective control over some elements of the security forces, particularly certain units of the PMF that were aligned with Iran".