JERUSALEM (Reuters) -- Israel upgraded a college in the occupied West Bank, territory the Palestinians want for a state, to the level of university on Tuesday, a move that critics said was politically motivated.

The Ariel University of Samaria's new status will entitle it to more state funding, and some see the move as designed to strengthen Israel's stake in the West Bank, territory it captured along with the Gaza Strip and East Jerusalem in 1967.

"This decision is not a decision to promote the education system in Israel," said Yariv Oppenheimer, head of the Israeli anti-settlement organisation Peace Now. "(It is intended) to gain the support of the settlers."

The chancellor of the university, founded in 1982 and attended by more than 13,000 students, dismissed the criticism.

"There are many Israelis very interested in developing Samaria and Judea," said Yigal Cohen-Orgad, using the biblical name for the West Bank.

The upgrade needs Israeli military approval to be finalized.

Palestinians want to establish a state in the West Bank, the Gaza Strip and East Jerusalem. Peace talks with Israel broke down in late 2010 in a dispute on settlements, which the Palestinians say deny them a contiguous, viable state.

About 311,000 Israeli settlers and 2.5 million Palestinians live in the West Bank. The United Nations deems all Israeli settlements in the West Bank to be illegal.