The Occupied Territories Bill, which aims to ban trade with illegal Israeli settlements, will be limited strictly to goods, according to Minister of State for European Affairs and Defence Thomas Byrne.
There had been widespread calls for services to be included in the bill, including a joint motion in the Dáil last month.
Mr Byrne said that the bill is limited to the import of goods and that it would not become law this year.
"It's an extremely limited measure, which would prohibit imports of goods from illegally-occupied territories," he said in an interview.
"Similar measures have already been brought in in a number of European countries."
The bill will ban trade with the Occupied Palestinian Territory by making any import from there an offence under the Customs Act, but does not cover services.
Speaking in the Dáil last month, Mr Byrne said the Government has "no policy issue with the inclusion of goods and services" in the bill.
People Before Profit-Solidarity TD Richard Boyd Barrett said last month that the bill has been legally cleared to include both goods and services following advice from the Oireachtas foreign affairs committee and from the Attorney General.
Mr Byrne's comments come as Ireland seeks to deflect pressure, including from US companies based here, to soften its criticism of Israel.
The bill is expected to help shape how other European nations launch similar curbs on trade with Israeli settlements.
The Government has signalled the bill is imminent but has yet to publicly announce its scope.
Mr Byrne declined to say when it would be sent to the Oireachtas, as the Government weighs the bill's implications.
"It's certainly not going to be implemented this year," he said.
Earlier this year, it was reported that the Government intended to blunt the law, curbing its scope to just a limited trade of goods, such as dried fruit, and not services.
Any inclusion of services in the bill could have entangled companies in technology and other industries in Ireland doing business in Israel.
Business lobby groups had sought to kill the idea.
Limiting the bill to goods only would catch just a handful of products imported from territories occupied illegally by Israel, such as fruit that are worth just €200,000 a year.
A ruling of the International Court of Justice deemed Israel's continued presence in the Occupied Palestinian Territory to be illegal.
The ruling obliged other states to put into effect measures to ensure an end to Israel's illegal presence in these territories.
Senator to continue to seek inclusion of services in bill
Senator Frances Black, who proposed the bill, said she would push to include a ban on services.
"It will take a lot of work in the new year to get services included but that's exactly what I'm prepared to do."
Mr Byrne also defended the Government, after Israeli Foreign Minister Gideon Saar recently posted a video online where he accused the Irish Government of having an "antisemitic nature".
Mr Saar said the Irish Government's response had been slow to a local proposal to rename a park bearing the name of Chaim Herzog, the former president of Israel who was raised in Dublin.
Irish ministers had roundly criticised the idea and Dublin City Council has since delayed a decision on whether to remove the name.
US Senator Lindsey Graham had also labelled Ireland a "cesspool of antisemitism".
"I reject outright that the country is in any way antisemitic," said Mr Byrne. "We're deeply conscious of the contribution that Jewish people have made in Ireland."
Ireland's relations with Israel have been fraught.
Last December, Israel shut its embassy in Dublin amid a row over Ireland's criticism of its war in Gaza, including Ireland's recognition of a Palestinian state last year.
MEP Barry Andrews urged Dublin to go ahead with the Occupied Territories Bill.
"Claims that Ireland is antisemitic are nonsense," he said.
"Ireland has nothing to fear. We are no longer the only ones doing this."
On Wednesday, Ireland's central bank governor Gabriel Makhlouf was forced to abandon a public speech in Dublin by pro-Palestinian protesters objecting to the central bank's earlier role in the sale of Israeli bonds.
