The move is an apparent response to new EU guidelines published last week that explicitly ban the funding of and cooperation with Israeli institutions operating beyond the pre-1967 lines.
Ya'alon's directive includes orders to halt any assistance that the IDF is providing to representatives of the EU working on humanitarian projects in the West Bank's Area C, which is under full Israeli civilian and military control. In other parts of the West Bank, Israel will continue to cooperate with EU officials as usual.
The EU's new restrictions set to take effect at the start of 2014 require the EU and its members to cease any joint activity or funding with Israeli entities working over the Green Line in the West Bank, in East Jerusalem, or in the Golan Heights.
The guidelines also require any future agreements between Israel and the European Union to include a clause in which Israel accepts the EU's position that all territory over the Green Line does not belong to Israel.
AP contributed to this report.