The Knesset passed a land reform bill Monday that allows for privatization of state-owned lands.
The second and third readings of the bill passed by a vote of 61 MKs in favor and 45 MKs against.
Kadima lawmakers criticized their Labor counterparts for supporting the bill after the second reading had passed.
"The Labor party finally buried its path today, abandoned its founders and is directly responsible for national land privatization," the party said.
"This is how it looks when a party that lacks power profits from the land of the Jewish people in exchange for a seat in the government."
A number of Labor MKs, the so-called "Labor rebels", slammed the party's support of public lands privatization, with Eitan Cabel saying it was "a black day for the Labor party".
Labor MK Pines-Paz said the party's support for the bill showed "the final failure of the Labor party."
Pines-Paz called the parliamentary deals behind the vote "a rotten, frightening, mafia-style compromise
Labor Party leader Ehud Barak struck a deal with Prime Minister Benjamin Netanyahu prior to the passage of the bill which stipulated that 400,000 dunams of land will be subject to privatization, half the size of the territory originally proposed in the legislation. The compromise paved the way for Labor's support for the bill.
The Arab minority rights center, Adalah, said the new law was prejudicial to the constitutional rights of Israeli Arabs, and violated the property rights of Palestinian refugees.
"It will lead to the transfer of title to private owners in real estate properties which were expropriated by the state from the Palestinian Arab population," Adalah said. "The law will also lead to privatization of property of some of the lands of destroyed and evacuated Arab villages, as well as many properties belonging to Palestinian refugees.
"This privatization policy will frustrate any future possibility of returning the abovementioned lands to their original Palestinian owners, in violation of their constitutional right to property and in contravention of both domestic Israeli law and international humanitarian law."
Earlier Monday, the Knesset passed a controversial law which allows for seven lawmakers from any one faction to break away from their party.
The bill, which is nicknamed "the Mofaz law" since it is widely believed that Prime Minister Benjamin Netanyahu would like to facilitate Kadima MK Shaul Mofaz's departure from the centrist party, passed its second and third readings by a 60-43 vote.
Mofaz, who has denied speculation that he intends to lead a splinter group of Kadima MKs into Netanyahu's government, denounced the prime minister for pushing the "undemocratic" law.
"The Likud splinter law passed and with it the message that Netanyahu is a weak prime minister who needs to threaten his ministers, buy the trust of his coalition partners with taxpayer money, all in order to ensure his political survival," a Kadima statement said in response to news of the law's passage.
"A black flag is flying over the Knesset today," Labor MK Ophir Pines-Paz said. "This is a law that the government should not have been allowed to bring before the Knesset, and the Knesset should not have been allowed to legislate."
"This is a continuation of the political thuggery of the government and the coalition," Pines-Paz said. "This is a dangerous distortion of the rules of the game and a cynical use of power. A serious government would not have done this, but this is a government that is drunk with power. This is the tyranny of the majority rather than a rule of the majority."