Poland's president on Saturday approved a law that will severely restrict claims on properties seized after World War II, prompting Israel to recall its envoy to Poland and brand the law "anti-Semitic".

The law sets a 30-year limit on legal challenges to property confiscations -- many of them relating to Poland's once thriving Jewish community.

Since the confiscations mostly occurred during the Communist era in the aftermath of the war, the law will effectively block thousands of claims.

President Andrzej Duda told Poland's PAP news agency he hoped the new rule would end an "era of legal chaos" and "reprivatisation mafias".

The government says it will bolster legal certainty in the property market but opponents say it is unjust to people with legitimate claims, including Holocaust survivors and their families.

"Poland today approved... an immoral, anti-Semitic law," said Israeli Foreign Minister Yair Lapid.

"This evening I instructed the charge d'affaires at our embassy in Warsaw to return immediately to Israel for consultations, for an indefinite period of time," he said.

"The new Israeli ambassador to Poland, who was scheduled to depart to Warsaw, will remain in Israel for the time being," Lapid added.

Israeli Prime Minister Naftali Bennett slammed the law as "shameful" and said it showed "disgraceful contempt for the Holocaust's memory".

"This is a grave measure that Israel cannot remain indifferent to," he said in a statement.

Lapid said the foreign ministry would recommend that the Polish envoy to Israel, currently on vacation, "continue his vacation in his country".

"He should use the time on his hands to explain to Poles the meaning of the Holocaust to Israelis," Lapid said.

Poland's foreign ministry responded with a statement saying that Israel's move was "unfounded".

"The steps taken by Israel are seriously damaging our relationship," it said, warning that it would take "appropriate political and diplomatic actions".

- 'Won't pay for Germany's crimes' -

After parliament passed the law this week, Lapid and US Secretary of State Antony Blinken had asked Duda not to sign it.

Blinken said he was "deeply concerned" and urged Poland to approve instead a comprehensive law to cover such property claims -- something other countries in Central and Eastern European have done.

But Polish Prime Minister Mateusz Morawiecki has said Poland "won't pay for Germany's crimes -- not one zloty, euro or dollar".

Six million Poles, half of them Jewish, were killed during World War II in Poland.

After the war, Communist authorities nationalised vast numbers of properties that had been left empty because their owners had been killed or fled.

While the law covers both Jewish and non-Jewish claimants, campaigners say Jewish owners will be disproportionately affected because they were often late in lodging claims after the war.

"Poland is, of course, not responsible for what Nazi Germany did during the Holocaust. However... Poland still benefits from this wrongfully acquired property," the World Jewish Restitution Organization (WJRO) said in a statement.

"Property restitution is about more than money –- for many of Holocaust survivors and their families, a home is the last remaining physical connection to the lives they once led," the advocacy group said.