The ICC has been examining the case brought by the Palestinians since 2015
The International Criminal Court's chief prosecutor says she wants to open an investigation into alleged war crimes in the Palestinian Territories.
Fatou Bensouda said "war crimes" had been or were being committed in the Israeli-occupied West Bank, East Jerusalem and Gaza Strip, and asked for a ruling on the court's territorial jurisdiction.
The ICC has been examining a case brought by the Palestinians since 2015.
Israel said the move was "baseless".
In a statement, Prime Minister Benjamin Netanyahu said the ICC, of which Israel is not a member, had "no jurisdiction in this case", and that the decision had turned the Hague-based court into a "political tool to delegitimize the State of Israel".
In her ruling, Ms Bensouda said a preliminary examination had gathered enough information to meet all criteria to open an investigation, and that she was "satisfied that there [was] a reasonable basis to proceed" with an inquiry.
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"[T]here are no substantial reasons to believe that an investigation would not serve the interests of justice," she said, adding that she had filed a request with judges to rule on what territory a future inquiry would cover because of the contested legal and factual issues of the territories.
Ms Bensouda did not specify the perpetrators of the alleged crimes but it is understood that in her preliminary inquiries she has been focused on issues like Israel's building of settlements and its military operations in Gaza, BBC Middle East analyst Alan Johnston reports.
Fatou Bensouda asked for a ruling on the ICC's territorial jurisdiction
The ICC has been examining what the Palestinians say are war crimes committed by Israel since June 2014, one month before a war between Israel and Palestinian militants in Gaza. In the fighting, 2,251 Palestinians, including 1,462 civilians, were killed while 67 soldiers and six civilians were killed on the Israeli side.
The Palestinians brought the case under the State of Palestine.
Mr Netanyahu described the announcement as an "outrageous decision", saying: "The ICC only has jurisdiction over petitions submitted by sovereign states. But there has never been a Palestinian state."
Earlier, Israel's attorney general said the ICC had no jurisdiction in the West Bank or Gaza. Israel also considers East Jerusalem, which it regards as its sovereign territory, as outside the court's mandate.
Reacting to the ICC decision, B'Tselem, an Israeli human rights group, said: "Israel's legal acrobatics in an attempt to whitewash its crimes must not be allowed to stop international legal efforts to, at long last, hold it to account."
Israel occupied the West Bank, Gaza and East Jerusalem in the 1967 Middle East war.
There are some 140 Israeli settlements in the West Bank and East Jerusalem, which most of the international community consider illegal under international law. Israel disputes this, and last month the US reversed its position and declared it no longer considered the settlements invalid.
Palestinians claim the territories for a future state, with East Jerusalem as its capital.
