The U.S. ambassador to Israel, David Friedman, called in November for dual national Issam Akel to be released, saying his suspected crime was "selling land to a Jew" and his incarceration violated American values.
Akel was accused of attempting to sell a property in East Jerusalem without the permission of his business partners or Palestinian authorities. Palestinian officials have not publicly identified the intended buyer.
The Higher Offences Court in Ramallah, in the West Bank, convicted Akel of "attempting to sever parts of Palestinian land and annex it to a foreign state," the judiciary media office said.
"In light of the conviction, the court handed down a life sentence with hard labour," it said. Akel can appeal, a judiciary official said.
The U.S. Embassy in Jerusalem declined to comment. Akel's family, which denied the allegations against him, said it was unaware of the verdict or sentence.
Akel was detained on October 10 in Ramallah, an Israeli security official said.
Palestinian law bars selling land to "a hostile state or any of its citizens". It requires the permission of the Palestinian Authority, which exercises limited self-rule in the West Bank, for all land sales in East Jerusalem.
Land sales in the Palestinian territories, including East Jerusalem, are fraught for Palestinians, who see Israeli efforts to buy up land as part of a plot to cement control of areas they seek for a state of their own.
Around 500,000 Israelis live in settlements in East Jerusalem and the West Bank, which most countries consider a violation of international law against settling occupied land.