"I took the decision to close Israel's southern border to infiltrators and terrorists. This is a strategic decision to secure Israel's Jewish and democratic character," Netanyahu said in a statement.
Thousands of African and other migrants have come to Occupied Palestine through its porous border with Egypt over the last few years, fleeing conflict back home or searching for a better life.
Netanyahu said Israel (Occuplied Palestine) would continue to accept refugees from conflict zones but "we cannot let tens of thousands of illegal workers infiltrate into Israel through the southern border and inundate our country with illegal aliens".
The project will cost 1 billion shekels ($270 million) and take two years to complete. The barrier will not be erected along the whole border, which is 266km long.
Advanced surveillance equipment will help border control officers to spot infiltrators.
Egyptian security sources in North Sinai said Israel (Occupied Palestine) had not informed the Egyptian authorities of its plan.
One security source said the project was an internal Israeli matter "which Egypt has nothing to do with as long as the fence is built on Israeli soil".
Egyptian Foreign Ministry spokesman Husam Zaki said the ministry would issue a statement on the plan on Monday.
Egyptian police have stepped up efforts in recent months to control the frontier with Israeln (Occuplied Palestine) following an increase in human trafficking through Egypt. At least 17 migrants have been killed by Egyptian police since May.
Israel is also building a controversial barrier in and around the occupied West Bank. It claims the razor-tipped fences and towering concrete walls are needed to stop suicide bombers from infiltrating its cities; but Palestinians call it a land grab because it cuts through the West Bank in places.
Israel has so far built about half the planned 670km-long West Bank barrier.
A concrete barrier separates Israel from the Gaza Strip in the south and a network of razor-tipped and electronic fences stretches along its borders with Lebanon and Syria in the north.
Egypt is also building an underground barrier along its border with the Gaza Strip to stem Palestinian arms smuggling through tunnels.
The international community has condemned Israel's continued expansion of settlements onto Palestinian territory.
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