A letter seen by AFP was signed by 400 European politicians from across a range of backgrounds who serve in national legislatures and senates or in the European parliament.
Addressed to European foreign ministers and EU foreign policy chief Josep Borrell, the letter argues that "the Biden administration presents a chance to correct course" in Middle East diplomacy.
"The previous US administration left the conflict farther away from peace than ever," it added.
Former president Donald Trump broke with much of the international consensus concerning the Israeli-Palestinian conflict.
Trump recognized Jerusalem al-Quds as the Zionist regime of Israel's "undivided capital" and moved Washington's embassy there, infuriating the Palestinians and the Muslim world.
The US State Department under Trump also said it no longer viewed Jewish settlements in the occupied West Bank as illegal.
Trump's widely criticized Middle East peace plan ear-marked parts of the West Bank for Israeli annexation.
While the Trump plan is dead, settlement expansion continues, with Israel regularly approving the construction of new homes for Jews on occupied Palestinian territory.
Israeli prime minister Benjamin Netanyahu, a close Trump ally, agreed to pause West Bank annexation plans in exchange for the diplomatic normalization with the United Arab Emirates.
"However, developments on the ground clearly point to a reality of rapidly progressing de facto annexation, especially through accelerated settlement expansion and demolitions of Palestinian structures," said the letter.
"Europe must work with the Biden administration, countries in the region and the parties on the ground to prevent unilateral action undermining the possibility of peace, advance the rights and security of all people under Israel's effective control."
Israel's occupation of the West Bank began following the 1967 Six Day War, the conflict that also saw it seize control of east Jerusalem al-Quds, an area it later annexed.