Israeli restrictions make normal life "close to impossible" for many West Bank Palestinians, the International Committee of the Red Cross has said.
Some Palestinians are often unable to reach a hospital or visit relatives, while 50% live in poverty, it said.
They are also frequently harassed by Jewish settlers, the organisation said.
An Israeli foreign ministry spokesman said the ICRC had ignored statements by the Palestinian Authority that West Bank residents lived a "normal life".
Whilst the economy has shown some signs of growth, the ICRC statement said restrictions linked to Israeli settlements had deprived many Palestinian farmers of their land.
It said attacks and harassment by settlers prevented many farmers from cultivating their own land, and some 10,000 Palestinian olive trees had been cut down or burned in the past three years.
"The ICRC has repeatedly called for action to be taken to allow Palestinians to live their lives in dignity," said ICRC head of operations in the Middle East, Beatrice Megevand-Roggo.
"We reiterate our call on Israel to do more to protect Palestinians in the West Bank against settler violence, to safeguard their land and crops, to allow families to repair their houses and to assure that all Palestinians can get to hospital or to school without delay."
Israeli foreign ministry spokesman Yigal Palmor said the report ignored official PA figures which showed the economic situation had "improved remarkably" over the past year.
He also referred to comments by PA President Mahmoud Abbas to the Washington Post in May 2009, where he said "in the West Bank, we have a good reality, the people are living a normal life".
In November, the Israeli government of Benjamin Netanyahu ordered a 10-month cessation of building new settlements in the West Bank, a precondition for peace talks demanded by the Palestinians.
But, according to information released by the Israeli government, around 30 settlements are still being developed in defiance of the order.
US attempts to revive peace talks have stalled over the Jewish settlement issue.
Palestinians say they will not return to peace talks unless Israel stops settlement building in the West Bank.
Israel has a long-standing commitment under an existing peace plan to stop settlement growth.
All settlements in the West Bank, including East Jerusalem, are considered illegal under international law, although Israel disputes this.
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