Environmental protection minister, Gila Gamliel, declares the usage of animal skin and fur as "immoral" after the announcement of the new regulation.
She also mentioned that the use of such materials will only be allowed under limited circumstances, reports BBC.
The only other countries to follow this regulation are the US and Sao Paulo in Brazil.
Currently, any individual who wishes to purchase or sell fur must hold a permit to do so. The permit only allows an individual access to fur only when it is in regard to "scientific research, education or for instruction and for religious purposes or tradition".
The exemption is likely to apply to Israel's sizeable ultra-Orthodox community, among whom many of the men wear large round fur hats called shtreimels, believed to have originated as a custom in Eastern Europe.
"The fur industry causes the killing of hundreds of millions of animals around the world, and involves indescribable cruelty and suffering," said Gamliel.
"Utilising the skin and fur of wildlife for the fashion industry is immoral."
Elisa Allen, the director of the People for the Ethical Treatment of Animals (Peta), praised Israel "for recognising that the trade-in coats, pom-poms, and other frivolous fashion items made from wild animals' fur offend the values held by all decent citizens".
Anyone found breaking the law in Israel will face a fine of up to $22,000 (18,500 euros; £17,000) or a year in prison.