The U.N. agency said it would, as of Jan. 1, suspend food assistance to 27,000 people in the West Bank. In addition, food aid to 165,000 people in the Israeli-occupied territory and in the Gaza Strip would be reduced by 20 percent.
"WFP has been forced, unfortunately, to make drastic cuts to the number of people that we support across Palestine, both in Gaza and the West Bank," Stephen Kearney, WFP country director in the Palestinian Territories, told Reuters.
He said the agency was making the cutbacks "mainly because the amount of funding that we are receiving is dropping drastically.
"It's not just WFP, it's across the whole humanitarian community as donor contributions significantly fall," Kearney said, blaming the shortfall on cuts by the United States, WFP's biggest contributor, and other countries in aid to Palestinians.
The United Nations and the Palestinian Authority appealed on Monday for $350 million in aid for Palestinians next year, saying much more was needed but they had to be realistic after a year of funding cuts, especially by the Trump administration.
Kearney told Reuters the WFP needs $57 million to maintain the current level of support for the benefit of 360,000 people in 2019.
"The people that we do reach are the most vulnerable across Palestine, and we appreciate that we are going to put further anxiety on these families," he said.
Kearney said that while food aid was crucial in Gaza, the territory's underlying problems would remain as long as Israel maintained its blockade and Palestinian factional infighting continued, preventing any long-term political solution.
A spokesman for the Palestinian Authority, which exercises limited self-rule in the West Bank, declined immediate comment.
In Gaza, Fawzi Barhoum, spokesman for the Islamist Hamas group that runs the enclave, urged the United Nations to "continue to provide the needs of the Palestinian people until they regain their freedom and not take decisions that worsen their suffering".
Maher al-Tabbaa, a Gaza-based economist, said the territory's poor would be especially hard-hit.
"The poverty rate in Gaza is over 53 percent and the WFP decision will get that higher, it will also affect the number of people suffering from food insecurity, whose percentage stands today at 70 percent," Tabbaa told Reuters. (Additional reporting by Jeffrey Heller in Jerusalem and Nidal al-Mughrabi in Gaza Editing by Jeffrey Heller and Mark Heinrich)
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