Jerusalem ? In a closely watched ruling, Israel’s Supreme Court ordered the government Tuesday to reroute a milelong segment of its West Bank separation barrier, effectively restoring hundreds of acres of agricultural land that had been taken from a Palestinian village to give to Jewish settlers.

The decision set a precedent by rejecting the government’s argument that the barrier’s routing could be justified to protect homes in a settlement that was planned but not yet built.

Israel’s Defense Ministry said it would “study the ruling and respect it.”

The decision was the fourth of dozens heard by the court to uphold a Palestinian challenge to the planned 490-mile route of the barrier, a combination of electronic fences, concrete walls, patrol roads and trenches that is about two-thirds complete.

Legal experts said the precedent could affect at least one similar challenge now under litigation and serve as a lesson to commercial developers about the risks of seeking profit from seizures of West Bank land for settlements.

Beyond its legal and economic effect , the ruling is a political victory for Palestinians in the tug-of-war over territory they want for a future independent state.

Of scores of Palestinian communities cut off from their land by the barrier, none has resisted more conspicuously than Bilin, whose 2-1/2 years of unruly demonstrations and legal challenges preceded Tuesday’s decision.

Hearing the news, more than 200 jubilant Bilin residents poured from their homes toward the fence, singing, dancing, honking car horns and waving Palestinian flags.

Instead of rocks, their weapon of choice in the weekly clashes, they tossed candy at jeeploads of Israeli soldiers watching stone-faced from the other side.

Saeb Erekat, a veteran Palestinian Authority negotiator, issued a statement praising the “heroic struggle and steadfastness” of the villagers and demanding that Israel dismantle the entire barrier and end its occupation of the West Bank, which it captured in the 1967 Middle East war.

“It is time to create bridges, not walls,” said Erekat, who is involved in a U.S.-initiated effort to revive negotiations over the obstacles to a peace accord – including the status of Jewish settlements, conflicting claims over Jerusalem and the fate of Palestinian refugees.