New Booking.com advisory will not refer to West Bank settlements as being in occupied territory
The alert, which came into effect on Friday, has been softened after the website initially planned to tell users that "visiting the area may be accompanied by an increased risk to safety and human rights or other risks to the local community and visitors".
After pushback from Israeli officials, the new warning instead urged customers to review their government's travel advisories before booking in the area, "which may be conflict-affected".
Omar Shakir, Human Rights Watch director for Israel and Palestine, said the alert was a "warm welcome" but more needed to be done.
"To stop contributing to grave rights abuse & apartheid, they should stop brokering rentals in unlawful settlements," Omar Shakir said.
The Israeli foreign ministry welcomed the softening of the warning on Saturday, which it said came after "discreet and effective dialogue" with the online travel agency, according to the Ynet news website.
Israeli Prime Minister Yair Lapid also hailed the effort, which he said was part of a policy "to maintain a constant political effort against false anti-Israel propaganda".
Booking.com announced it would introduce a new warning two weeks ago. It said it applied to all listings in conflict zones worldwide and aimed to "make it easier for every person to experience the world".
"In accordance with this goal, we are attempting to ensure that our clients have the information needed in order to make decisions about destinations they wish to visit," Booking.com told Israeli newspaper Haaretz.
"Certain areas in the world affected by conflict may pose a greater risk to travellers, so we provide our customers with information to help make decisions and encourage them to check their government's official travel guidelines as part of the decision-making process."
Israel occupied the West Bank and Jerusalem's eastern neighbourhoods, including the Old City, in the 1967 Middle East war. Since then, it has settled hundreds of thousands of its citizens in the territories in contravention of international law.
Booking.com rival Airbnb previously planned to delist properties in Israeli settlements, but in 2019 backtracked on the decision and said it would take no profits in the territory, instead donating proceeds to international humanitarian aid organisations.
According to Israeli NGO Peace Now, more than 450,000 settlers live in the West Bank alongside 2.8 million Palestinians. Another 230,000 Israeli settlers live in East Jerusalem.