The fence would affect the ecology of a national park and separate farmers in a West Bank village from their fields, Haaretz reported Thursday.
The Israel Nature and Parks Authority recently sent a document to the Defense Ministry rescinding the agreement it reached with the ministry six years ago and asked it to find an alternative to provide security near the village of Battir.
The INPA wrote that the fence would be a "foreign engineering element" that could irreversibly harm millennia-old agricultural terraces around Battir.
Residents of Battir have always lived peacefully in the area, INPA said, and were the only Palestinians allowed to cross into Israel and work their fields before the Six Day War.
It also would restrict the free movement of wild animals, possibly leading to their extinction, the document added.
Furthermore, the agency said, the Palestinian Authority recently applied for UNESCO to place the area on the World Heritage List.
In earlier talks with the INPA, the Defense Ministry said it was essential for the fence to pass through the area and that the lands necessary to build the fence had been legally purchased from Battir residents.