Cranes last week began erecting the fence in the Cremisan valley near the Palestinian town of Beit Jala south of Jerusalem after a legal battle.
The EU said in a statement it was "deeply concerned at the relaunch of works for the construction of the separation barrier in the Cremisan valley."
"Once built, the barrier will severely restrict access of almost 60 Palestinian families to their agricultural land and profoundly affect their livelihoods."
Residents of Beit Jala fear the construction may lead to the expansion of the nearby Israeli settlements of Gilo and Har Gilo, AFP reported.
They have sought to campaign against it, but after a nine-year legal battle Israel's high court ruled in July 2015 that the wall was legitimate and allowed construction to resume.
Israel began building the barrier of walls and fences inside the occupied West Bank in 2002 at the height of the second Palestinian intifada (uprising), saying it was crucial for security.
The Palestinians see it as a land grab aimed at stealing part of their future state.
In a non-binding decision, the International Court of Justice ruled in 2004 that construction of the barrier was illegal and, like the UN General Assembly, demanded it be dismantled.