According to the report by the Association for Civil Rights in Israel, extreme poverty and high unemployment rates in East Jerusalem are a direct result of decades of Israeli policies which have stifled the economy in Palestinian areas.

Israeli authorities have also revoked the status of 14,084 Palestinian Jerusalemites since 1967, no longer permitting them to live in the city.

"More and more Palestinian families in Jerusalem are caught in the cycle of poverty not by chance but rather as a result of policies," ACRI Attorney Nisreen Alyan, who co-wrote the report, said on their website.

Over 84 percent of Palestinian children live below the poverty line and there has been a 10 percent increase in overall poverty rates since 2006, ACRI said.

The report found that over 85 percent of Palestinian women and 40 percent of men do not participate in the work force and Palestinian schools have a dropout rate of 40 percent.

'Policies of Neglect in East Jerusalem' was published this week to coincide with Sunday's Jerusalem Day, when Israel celebrates extending its control to the Eastern part of the city, a move not recognized by the international community.

"Palestinian residents in Jerusalem find themselves stuck between a rock and a hard place," Ronit Sela, one of the reports' authors, told Ma'an.

"For 45 years, Palestinian residents have been left out of a decision making process which works directly against their interests," she said.

Finding themselves involuntarily under Israeli control, Palestinians in Jerusalem do not play any part in policy-making in the city, even though Israeli authorities have an obligation to uphold their rights, Sela added.

Once a center for Palestinian political, economic, religious and cultural life, the "effects of annexation, neglect, rights violations, and the completion of the Separation Barrier have led to an unprecedented deterioration in the conditions" of East Jerusalem.

The report called on Israel to cease all measures that violate the basic rights of Palestinian residents.

There are around 360,882 Palestinians in Jerusalem, or 38 percent of the city's population.

Israel has occupied East Jerusalem since 1967 and formally annexed the area in 1980 after passing the 'Jerusalem Law'.

Jerusalem is one of the key final status issues in any future peace agreement.