The launch of the new activities, to be endorsed at high-level EU-Israel talks in Brussels on Tuesday, has angered critics.
They say it is politically inopportune and clumsy, condoning the very Israeli actions EU foreign ministers condemned in a strongly worded statement issued on May 14.
In the May statement, the bloc's 27 foreign ministers said the gathering pace of settlement building, settler extremism and the ill-treatment of Palestinians "threaten to make a two-state solution impossible."
The new move, details of which were outlined to AFP at the weekend, involves closer cooperation on transport and energy, and enhanced ties with nine EU agencies, including the police body Europol and the European Space Agency.
The package, covering up to 60 new activities, will be on the agenda of Tuesday's annual meeting of the EU-Israel Association Council, which manages a bilateral agreement that came into force in 2000.
But one European diplomat, speaking on condition of anonymity, said the stronger ties indicated the continuing double standards of the bloc's ties with Israel.
"Once again we're hearing critical words on the one hand but it's business as usual on the other," he said.
"EU statements on the peace process are no more than theatre." Officials in Brussels stressed however that the 60 new areas of cooperation in 15 fields were a mere follow-up to a 2005 action plan and did not represent an upgrade in EU-Israeli relations. "There is absolutely no change in our policy," said one EU official, who asked to remain anonymous.
"EU policy was always to continue implementing the existing action plan with Israel. And In Israel Paul Hirschson, deputy spokesman at Israel's foreign ministry, made a similar point.
"This is related to the existing work plan rather than some sort of upgrade because that way, the EU would have to find a way of delinking it from the peace process," he said.
"Given the fact that they have decided to expand cooperation, it just goes to show that the relationship is mutually beneficial," he added.
"Even with the US, we have our differences of opinion but that doesn't prevent bilateral trade from going forward and flourishing."
The European Union is Israel's top trading partner. But an Israeli bid to upgrade ties with its top trading partner in late 2008 was suspended after its offensive on the Gaza Strip.
Any progress was to be conditional on progress in the Middle East peace process, in which the EU is a stakeholder.
Speaking on condition of anonymity, an Israeli diplomatic source said mutually important trade ties outweighed all other considerations.
"It's like the Indians and the Chinese have said: do you want to do business or not? So the Indians and the Chinese vote against us in the UN but our commercial relations are progressing in leaps and bounds because it's beneficial for both sides. "