"The US has announced it will contribute $60 million to the programme budget. There is for the moment no other indication of possible funding," UNRWA spokesman Chris Gunness told AFP.
"This dramatically reduced contribution results in the most severe funding crisis in the history of the agency."
The United States held back $65 million that had been destined for UNRWA on Tuesday, two weeks after President Donald Trump threatened future payments.
The State Department said $60 million of what had been a planned $125 million package would go through to keep the agency running, but the rest will be withheld for now.
Palestinian children hold banners against cutting off food aid during the protest outside the UN headquarters in Gaza City, January 4, 2018. Source: Getty
UNRWA said the $60 million would keep schools and hospitals open for the time being, but noted that it was dramatically less than the $350 million Washington paid during 2017.
State Department officials insisted the decision was taken not to pressure Palestinian leaders but to encourage other countries to help pay for and reform UNRWA.
Israeli Prime Minister Benjamin Netanyahu has called for UNRWA to be shut down altogether.
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