President Donald Trump said the U.S. would take over war-ravaged Gaza and create a "Riviera of the Middle East" after resettling Palestinians elsewhere, shattering decades of U.S. policy on the Israeli-Palestinian conflict and drawing regional condemnation.

The shock move from Trump, a former New York property developer, was swiftly condemned by regional heavyweight Saudi Arabia which Trump hopes will establish ties with Israel.

Trump, in his first major Middle East policy announcement, said he envisioned building a resort where international communities could live in harmony. Trump's son-in-law and former aide, Jared Kushner, last year described Gaza as "valuable" waterfront property.

The casual proposal sent diplomatic shockwaves across the Middle East and around the globe. China said it opposed the forced transfer of Palestinians and Turkey called the proposal "unacceptable".

"China has always believed that Palestinians governing Palestine is the basic principle of post-conflict governance," China's Foreign Ministry spokesperson Lin Jian said, adding Beijing backs a two-state solution in the region.

An official from Palestinian militant group Hamas, which ruled the Gaza Strip before fighting Israel in a brutal war there, said Trump's statement about taking over the enclave was "ridiculous and absurd".

"Any ideas of this kind are capable of igniting the region," Sami Abu Zuhri told Reuters, saying Hamas remains committed to the ceasefire accord with Israel and "ensuring the success of the negotiation in the second phase".

It is not clear whether Trump will go ahead with his controversial plan or is simply taking an extreme position as a bargaining strategy.

Trump provided no specifics of his plan, unveiled at a joint press conference on Tuesday with visiting Israeli Prime Minister Benjamin Netanyahu.

"The U.S. will take over the Gaza Strip and we will do a job with it too...we're going to develop it, create thousands and thousands of jobs, and it'll be something that the entire Middle East can be very proud of," Trump told reporters.