Ban told the United Nations Security Council, "Let me be absolutely clear: Settlements are illegal under international law. The occupation, stifling and oppressive must end."
He said Netanyahu's statement was disturbing, Reuters reported.
In a video released last week, Netanyahu rejected the notion that the occupied West Bank settlements were "an obstacle to peace", drawing a rebuke also from Washington.
The Israeli prime minister alleged that the Palestinian leadership sought a Palestinian state on the condition that it was “a state without Jews.”
The US State Department called the video "unhelpful" and "inappropriate".
More than half a million Israelis live in over 230 settlements built since the 1967 Israeli occupation of the Palestinian territories of the West Bank and East Beit-ul-Moqaddas.
The Palestinians hope to establish an independent state in the occupied West Bank along with Gaza Strip and East Beit-ul-Moqaddas as its capital. Israel captured the West Bank in the 1967 war.
Most countries view Israeli West Bank settlements as illegal and an obstacle to peace. Israel rejects this, saying Jews have been living in the territory for thousands of years.
Two Palestinians killed
Two Palestinians were shot dead by Israeli troops on Friday, in the occupied West Bank and East Beit-ul-Moqaddas.
The Israeli military claimed that two Palestinians rammed a car into a bus stop used by Israelis in the occupied West Bank on Friday.
It came shortly after Israeli police said they shot dead a 28-year-old Palestinian who they claimed tried to stab police officers in East Beit-ul-Moqaddas.
"Forces at the scene fired at the vehicle resulting in the death of one of them while the other was wounded," the army said.
The Palestinian Health Ministry identified the dead suspect as Fares Khadour.
Violence since October has killed 227 Palestinians, 34 Israelis, two Americans, one Eritrean and a Sudanese.