The UN's agency for Palestinian refugees, Unrwa, is banned from operating in Israel.
Furthermore, Israeli officials are not allowed to meet with Unrwa staff, provide them with diplomatic visas, or offer them economic benefits.
The decision was made by the Knesset's foreign and security committee on Sunday, reports the Jerusalem Post.
An internal UN investigation, presented in August, showed that nine people who worked for Unrwa may have been involved in Hamas' terrorist attack on Israel on October 7 last year. The nine have been dismissed.
The investigation was conducted since Israel accused 19 Unrwa employees of possibly being involved in the attack.
Unrwa, which has provided necessary aid to Palestinian refugees since 1949, has long been criticized by Israel.
