The DNC's platform committee rejected a suggested amendment that included the use of the word "occupation", opposition to settlements, as well as a pledge that "no US aid may be used to facilitate annexation or to violate Palestinians' rights".
The amendment was introduced by Clem Balanoff, the Illinois director of the pro-Bernie Sanders non-profit "Our Revolution".
Although 34 members voted in favour of the motion, 117 opposed it and five abstained.
Two Obama-era officials who participated in drafting the platform's foreign policy chapter argued against the amendment during Tuesday's drafting committee meeting.
"We should not let disagreements about words or specific policies threaten our party unity, especially at a time when the current administration has chosen to ignore Palestinians and is so uninterested in pursuing a credible path to a two-state solution," Shapiro said.
"[Our platform] makes a clear credible commitment to help bring an end to a conflict that has brought so much pain to so many Palestinians and Israelis," he added.
"Israel has no better friend than Joe Biden," said former Under-Secretary of State Wendy Sherman. "Our assistance to Israel is a mutually beneficial investment. One that protects Israel against very real threats and helps promote security and stability in the region."
Sherman added that Biden has been "extremely clear that he opposes annexation" and will continue to do so if he wins the presidency.
Conditioning American military aid, Sherman said, "will do nothing to actually bring the two sides together and advance a two-state solution".
US Democratic presidential hopeful Joe Biden has expressed opposition to Israel's planned annexation of swathes of the West Bank, as well as advocated for a Palestinian state.
The former vice-president also said he would remain an ally to Israel and uphold military aid to the the country.
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