Pompeo said in a press conference on Monday that the decision, which reversed the former Barack Obama administration's position on the issue, had been made based on the "reality on the ground", reports Xinhua news agency.
"The conclusion that we will no longer recognize as per se inconsistent with international law is based on the unique facts, history, and circumstances prevented by the establishment of civilian settlements in the West Bank," he said, adding that the decision was made "after carefully studying all sides of the legal debate".
Pompeo also noted that this announcement should not be viewed as the US government "addressing or prejudging the ultimate status of the West Bank".
"This is for the Israelis and the Palestin to negotiate," he said.
Pompeo's remarks were seen as the latest act by President Donald Trump's administration to side with Israel, following its widely criticized recognition of Jerusalem as the country's capital in 2017, the official relocation of the US embassy to Jerusalem in 2018, and US recognition of Israel's "sovereignty" over disputed Golan Heights this March.
The last round of peace talks between the Israelis and Palestin collapsed in 2014, mainly over Israel's continuing expansion of the settlements in the West Bank.
UN Special Coordinator for the Middle East Peace Process Nickolay Mladenov said last month that Israeli settlements in the occupied Palestinian territories were illegal under international law and remained a substantial obstacle to peace.
According to the latest Palestinian data, around 400,000 Israeli settlers live in 135 settlements and 100 illegal outposts in the West Bank, where the Palestinian population has reached 2.6 million.
( With inputs from IANS )