A senior official in the office of Israeli Prime Minister Benjamin Netanyahu
told CNN that the Prime Minister had stepped in after deciding that the program -- backed by Defense Minister Moshe Yaalon -- was not acceptable.
"These proposals are unacceptable to the Prime Minister. He spoke this morning with the defense minister and it was decided to freeze the whole matter," the official said.
It is not clear what will happen with the experimental program now.
Word of the suspension came within hours of Israel Radio reporting that the Israeli Ministry of Defense had started the trial separation of Jews and Palestinians on bus lines running in the occupied West Bank.
Under the pilot plan, Palestinians who travel to work in Israel through the four main checkpoints could return to the West Bank only through the same checkpoints they exited. This means they could not return on Israeli buses, as they have done until now, but would have to ride on Palestinian-only buses.
According to Israeli news website Haaretz, this could lengthen some Palestinian workers' journeys
by as much as two hours a day.
The Israeli security apparatus said the program was being put into place to boost security by improving the surveillance of Palestinians entering Israel
. It was also aimed at reducing friction between Israelis and Palestinians.
Instead, it has unleashed a chorus of condemnation.
President: 'Unthinkable separation'
Israel's President Reuven Rivlin said he had spoken with Yaalon on Wednesday and "welcomed halting the process that that could have led to an unthinkable separation between bus lines for Jews and Arabs."
As one who loves Israel, he said, "I have nothing but regret for the discordant voices that we heard this morning, supporting the separation between Jews and Arabs on the basis of ideas that have no place being heard or said. Such statements go against the very foundations of the State of Israel, and impact upon our very ability to establish here a Jewish and democratic state.
"Such statements cause great damage to the State of Israel, and to the settlement movement. It is important we remember that our sovereignty obligates us to prove our ability to live side by side."
Opposition leader Isaac Herzog of the Zionist Union also criticized the proposal in a post on his official Facebook page, saying it was a mistake that would damage Israel's public image at a sensitive time.
"The separation between Palestinians and Jews on public transport is a unnecessary humiliation and a stain on the face of the state and its citizens," he wrote. "It is unnecessary oil on the flames of hate for Israel in the world."
The trial, instituted under the order of the defense minister, had been in the works for some time and was supposed to last three months.
Israeli settlers in the West Bank have long called for such a program on security grounds, Haaretz said. But human rights groups were expected to appeal the program.
Haaretz quoted attorney Michael Sfard, counsel to the nongovernmental organization Yesh Din, as saying the proposal, if implemented, "is a shameful and racist measure that causes Israel to deteriorate to a low moral point."
Palestinian driver shot
Also Wednesday, Israeli forces shot and killed a Palestinian man in the al-Tur neighborhood east of the Old City of Jerusalem, claiming he attempted to run over border guard police officers with his vehicle.
Israeli police spokesman Mickey Rosenfeld said the driver had "deviated from his path" toward the border police officers, hitting two of them, who were taken in moderate condition to hospital. A third officer shot the driver.
Witnesses told the Ma'an news agency that Israeli officers opened fire at the man at the main crossroads in al-Tur. He died shortly afterward. One witness told the news agency the man had only been attempting a U-turn.