The US Agency for International Development (USAID) has ceased all assistance to Palestinians in the occupied West Bank and Gaza, a US official said on Friday, Reuters reports.
The halt was requested by the Palestinian Authority but is certain to bring further hardship to people in the already deprived territories.
The deadline also sees the end of about $60 million in US aid for the Palestinian security forces, whose cooperation with Israeli forces helps maintain relative quiet in the West Bank.
The decision was linked to a 31 January deadline set by new US legislation under which foreign aid recipients would be more exposed to anti-terrorism lawsuits.
The Anti-Terrorism Clarification Act (ATCA) empowers Americans to sue foreign aid recipients in U.S. courts over alleged complicity in "acts of war".
The Palestinian Authority declined further US funding over worries about its potential legal exposure, although it denies Israeli accusations that it encourages militant attacks.
"At the request of the Palestinian Authority, we have wound down certain projects and programs funded with assistance under the authorities specified in ATCA in the West Bank and Gaza, a US official told Reuters on Friday.
"All USAID assistance in the West Bank and Gaza has ceased."
It was unclear how long the cessation would last. The official said no steps were currently being taken to close the USAID mission in the Palestinian territories, and no decision had been made about future staffing at the USAID mission in the U.S. Embassy in Jerusalem.
USAID is the main agency administering U.S. foreign assistance in the Palestinian territories. According to its website, the agency spent $268 million on public projects in the West Bank and Gaza as well as Palestinian private sector debt repayment in 2017, but there were significant cuts to all new funding through the end of June 2018.
Nabil Abu Rudeineh, a spokesman for Palestinian President Mahmoud Abbas, said: "The suspension of aid to our people, which included critical sectors such as health and education, will have a negative impact on all, create a negative atmosphere, and increase instability."
The Palestinian Authority is an interim self-government body set up following the 1993 Oslo peace accords. The peace process, aimed at finding a two-state solution to the Israeli-Palestinian conflict, has been stalled since 2014.
In the Hamas-ruled enclave of Gaza, Hamas spokesman Ismail Rudwan condemned the cuts, deploring what he called "politicised money".