Washington has always been the UN Relief and Works Agency's (UNRWA) largest donor but is "no longer willing to shoulder the very disproportionate share of the burden", State Department spokeswoman Heather Nauert said in a statement.
UNRWA now supports some five million registered Palestinian refugees and provides schooling to 526,000 children in the Palestinian territories as well as in camps in Lebanon, Syria and Jordan.
The U.S. had always been the biggest donor to the agency, providing about 25 percent of its funding; The Guardian reports that Germany plans to make up at least some of the financial shortfall.
Under the Donald Trump administration, the USA government had previously slashed its budget to UNRWA operations in the occupied Palestinian territories from $365m to just $65m, resulting in work redundancies and a drop to part-time contracts for numerous agency's Palestinian employees and full-time staffers.
It has also said it is unhappy that Unrwa has kept expanding the number of people eligible for assistance, and says its business model is "simply unsustainable and has been in crisis mode for many years".
Palestinian officials have condemned the USA decision to end all funding to the UN's Palestinian refugee agency.
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The Times of Israel reported that "Jordan said Thursday it would host a fundraiser at the United Nations headquarters in NY next month to keep UNRWA afloat".
UNRWA also slammed the U.S. decision, dismissing Nauert's characterization of the agency.
Today, there are an estimated 5 million refugees and their descendants, mostly scattered across the region _ a figure that has become a point of contention.
US President Donald Trump and his aides say they want to improve the Palestinians' plight, as well as start negotiations on an Israeli-Palestinian peace agreement.
"These very programmes have a proven track record in creating one of the most successful human development processes and results in the Middle East".
"We appreciate its support over the years", a statement attributable to Stephane Dujarric, Spokesman for the UN Secretary-General, said.
U.S. Ambassador to the U.N. Nikki Haley has advocated for cutting funding to the UNRWA, saying on Tuesday that Palestinians "continue to bash America".
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Palestinian officials have also condemned the move.
The head of the Palestine Liberation Organization (PLO) delegation to the United States, Husam Zomlot, accused the Trump administration of reneging on its worldwide commitment and doing Israel's bidding.
A spokesman for President Abbas told Reuters the decision was in "defiance of United Nations resolutions", and would not change the fact that the USA "no longer has a role in the region" and "is not a part of the solution".
Gaza medics said 180 Palestinians were wounded, a third of them from live fire, including a female nurse and a boy.
"An immediate and capricious cut off of UNRWA funding ... risks collapsing the Palestinian Authority, empowering Hamas, and shifting the responsibility of health, education, and ultimately security services to the Israelis", Harden said.
"Israel welcomes the American decision", Israeli Prime Minister Benjamin Netanyahu's office said in a statement.
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