That claim is not quite true. It is more complicated than that. Here are the main issues.
The West Bank and Gaza had many Jews living there in 1948.
In 1948, Jordan invaded and ethnically cleansed all Jews living there and seized the land.
In 1967, Jordan attacked Israel and lost the WB and Gaza to Israel.
Jordan later renounced their claim to the West Bank and Gaza.
Palestinian Arabs WANT to have the WB and Gaza as part of a state.
Currently, the land belongs to no country. Under UN SC Res 242, the land is in legal limbo (in terms of belonging to a country) and may be administered by Israel until and unless all relevant parties peacefully negotiate final status borders.
"sovereignty" and "ownership" are different issues.
Sovereignty is about what country has rights to control a place.
"Ownership" is about who owns a particular plot of land.
Most of the "settlements" are built on land that is either Jewish owned private property OR government owned land.
However, the Palestinian Arabs claim that because they want to have all the WB and Gaza, that any Jew living anywhere on it, even if it is private property owned by a Jew or public land not owned by any individual, is an act of war and obstacle to peace.
Others argue that just because Arabs ethnically cleansed the Jews from the WB and Gaza in 1948 doesn't mean they get to keep it Jew free just because they want it to be so.
Pro Palestinians argue: the land is "palestinian" and so Israel is "taking" palestinian land.
Pro Israelis argue: it is not palestinian land. It is open land whose final status is open to negotiations. And having someone live there is irrelevant to the process. Jews are living on Jewish or public property. If the land ends up going to a Palestinian state either they can accept Jews living there (after all, 20% of all Israelis are Arab Israelis) or Israel can move them as they moved the settlers off of land that Israel gave to the PA already.