The International Criminal Court prosecutor on Wednesday said her office would formally investigate war crimes in the Palestinian Territories.
The move was welcomed by the Palestinian Authority and denounced by Israel.
"The decision to open an investigation followed a painstaking preliminary examination undertaken by my office that lasted close to five years," prosecutor Fatou Bensouda said.
"In the end, our central concern must be for the victims of crimes, both Palestinian and Israeli, arising from the long cycle of violence and insecurity that has caused deep suffering and despair on all sides."
She promised a "principled, non-partisan approach".
Ms Bensouda, who will be replaced by British prosecutor Karim Khan on June 16, said in December 2019 that war crimes had been or were being committed in the West Bank and Gaza Strip.
She named the Israel Defence Forces and armed Palestinian groups such as Hamas as possible perpetrators.
The decision follows a ruling by the court on February 5 that the ICC has jurisdiction in the case, prompting swift rejections by Washington and Jerusalem.
The Biden administration expressed its opposition to the decision on Wednesday.
“We oppose the prosecutor's decision and are disappointed with it,” State Department spokesman Ned Price said.
"We will continue our commitment to Israel and oppose moves that harm Israel. The tribunal has no authority on the matter."
Last month, the US government rejected the court’s decision in which it claimed jurisdiction in the West Bank, East Jerusalem and Gaza.
“As we made clear when the Palestinians purported to join the Rome Statute in 2015, we do not believe the Palestinians qualify as a sovereign state, and therefore are not qualified to obtain membership as a state or participate as a state in international organisations, entities or conferences, including the [International Criminal Court],” it said.
“We have serious concerns about the [court's] attempts to exercise its jurisdiction over Israeli personnel."
It is unknown if the US will try to challenge the court's decision at the UN Security Council.
The next step will be to determine whether Israeli or Palestinian authorities have open investigations and to assess those efforts.
Israeli Prime Minister Benjamin Netanyahu said the court's decision was "undiluted anti-Semitism and the height of hypocrisy".
Mr Netanyahu accused the court of turning "a blind eye" to Iran, Syria and other countries that he said were committing "real" war crimes.
"Without any jurisdiction, it decided that our brave soldiers, who take every precaution to avoid civilian casualties against the worst terrorists in the world who deliberately target civilians, it's our soldiers who are war criminals," he said.
Israeli Foreign Minister Gabi Ashkenazi said the decision was "morally bankrupt and legally flawed".
Israel’s ambassador to the US, Gilad Erdan, vowed to "continue working together with the American administration against this shameful decision".
The prosecutor's office was sanctioned during the administration of former president Donald Trump.
Washington opposes the court's investigation into the role of US troops in possible war crimes in Afghanistan.
The Palestinian Authority's Foreign Ministry welcomed the prosecutor's investigation as "a long-awaited step that serves Palestine’s tireless pursuit of justice and accountability, which are indispensable pillars of the peace the Palestinian people seek and deserve".
It urged all states to "refrain from politicising these independent proceedings".
George Giacaman, a Palestinian political analyst and professor at Birzeit University in the occupied West Bank, said the decision showed the Palestinian leadership's strategy of appealing to global institutions had had some success.
"At best, one can say that in the future, the Israelis will be more careful with hitting Palestinian civilians," Mr Giacaman said, while cautioning that the investigation could take years.
"Perhaps the [court] will prove to be a deterrent."
The militant group Hamas, which controls Gaza and is regarded as a terrorist organisation by Israel, the US and the EU, defended its own actions in the conflict.
“We welcome the [court's] decision to investigate Israeli occupation war crimes against our people,” said Hazem Qassem, a Hamas spokesman in Gaza.
"It is a step forward on the path of achieving justice."
Rights groups said the decision offered victims hope of justice.
Balkees Jarrah, associate international justice director at Human Rights Watch, said member countries should be ready to protect the court’s work from any political pressure.
The International Criminal Court is a court of last resort established to prosecute war crimes, crimes against humanity and genocide when a country is unable or unwilling to do so.
Pro-Israel lobbying group the American Israel Public Affairs Committee, urged President Joe Biden to maintain the sanctions on court officials pursuing what it called "illegitimate, politically motivated investigations into the US and Israel".
