Image copyright AFP Image caption The Israeli tax agency says that the groups have overstayed their visas
Six Palestinian civil society groups have been declared “terrorist organisations” by the Israeli tax agency and their assets frozen.
They are accused of involvement in Hamas-sponsored attacks in 2007 against Israeli soldiers.
The tax department said it was setting up a fund to reimburse aid recipients.
The decision marks a crucial test of Israel’s standing within international community and UN support.
Israel has moved steadily against grassroots Palestinian groups in recent years, accusing them of terrorism and, in some cases, in efforts to defend themselves.
It accuses Gaza-based Hamas of being behind rockets launched at Israel in Gaza. Hamas says it only protects Palestinians and is committed to non-violence.
Image copyright EPA Image caption Palestinians face Israeli control over movement and access to lands across the West Bank
Palestinian officials strongly condemned the moves against the Palestinian groups.
“The regime of occupation and the occupation’s security forces are trying to monopolise power and the Palestinian Authority is being used to cover up this deplorable incident,” Palestinian Authority spokesman Nabil Abu Rdainah said.
“This decision should be condemned by all civilized human beings.”
Ban Ki-moon, the outgoing UN secretary-general, said in a statement: “These new activities, seriously upsetting the well-established international conventions and policies for the protection of civilians and oversight of humanitarian goods, will, if not checked, render Gaza an open-air prison with no guarantee for its inhabitants’ liberty or safety.”
The groups included Al-Haq, the General Federation of Palestinian Women and two Palestinian legal associations: Al-Hamadat al-Laba and al-Museha al-Bahal.
Israeli tax authorities say they are guilty of financial transfers to the illegal Hamas rulers of Gaza – activities that could help fund the shelling of Israel.
Image copyright EPA Image caption Israel says the groups are illegally supporting Hamas, and will pay aid beneficiaries
The organisations have denied the accusations and said Israel was using them as tools to support its blockade of Gaza.
The six groups are accused of helping fund the rocket fire which led to the killings of several of Israel’s soldiers.
They have been allocated $30m (£24m) in 2011 – which amounts to around 5% of their annual budget – by the Israeli government and non-governmental organisations.
But some of their funds may have been diverted to the Hamas group, said the head of Israel’s department of general customs, Eyal Sharshani.
The Israeli tax authority argued that the civil society groups had overstayed their visas by seven years and therefore face being refused entry, according to the Jerusalem Post newspaper.