US President George Bush announced the $50-million cash payment to the Palestinian Authority when its President, Mahmoud Abbas, visited the White House in May.
The oversight requirements for the money go beyond controls placed on two previous US cash payments to the Palestinians.
An agreement among Congress, the State Department and the Palestinian Authority requires that the money go into a separate bank account earmarked only for projects vetted by the US.
Details of the agreement are contained in a 22 July letter to Bush from the chairman of the House Appropriations Committee's foreign operations panel.
Separately, Secretary of State Condoleezza Rice is considering whether to recommend an additional, quick payment to the Palestinians ahead of next month's planned pullout of Israeli troops and settlers from the Gaza Strip, said congressional aides who spoke on condition of anonymity.
That money would come from a pot of about $37 million in unused funds intended to promote peace in the Middle East.
Almost all previous US aid to the Palestinians had been funnelled through third parties to avoid the possibility that the money might be used to finance fighting or be lost to corruption.
Rice may recommend additional
payment in time for pullout
The $50-million payment, only now making its way out of Congress, will go to pay for housing and other projects to improve the lives of Palestinians in Gaza, one of the most overcrowded places on earth.
Israel will begin pulling out of its 21 Gaza settlements in mid-August, eventually to vacate fully the territory it took along with the West Bank in the 1967 Middle East war.
It is to abandon four small settlements out of 120 in the West Bank.
The US is the largest single donor to the Palestinians, with $275 million to be spent this year. Washington is also the largest donor to Israel, which receives more than $2 billion a year in US aid.
The Palestinians must make quarterly reports on spending, and the US Agency for International Development will report to Congress every two weeks on the progress of projects being financed by the cash.
Subcommittee chairman Jim Kolbe of Arizona revealed the agreement during a hearing on Tuesday on US support for the Gaza pullout.
The agreement requires "repayment if discrepancies are found", the letter to Bush said. "The Palestinian Authority will repay any funds which are used in any way not mutually agreed by the United States and the Authority."
A burst of violence in Gaza had stopped just before Rice visited the region last week, but both sides are nervous that the pullout will be marred by further attacks from Palestinian groups or violent Israeli army confrontations with Israeli settlers who refuse to leave.
"It is our responsibility to take every step to ensure that our funds do not, even indirectly, help support any activity that could undermine the nascent peace process"
"The recent upsurge in violence demonstrates that circumstances can change rapidly in this region of this world," Kolbe said at Tuesday's hearing.
"It is our responsibility to take every step to ensure that our funds do not, even indirectly, help support any activity that could undermine the nascent peace process."
Assistant Secretary of State David Welch assured the committee of his department's commitment "that US taxpayer dollars are channelled into the right hands".
"We want to make sure that disengagement leads to revival of the Palestinian economy, to greater security for both Palestinians and Israelis and to renewed confidence between the parties," Welch said.
"There is room for optimism about fulfilling these goals, though there are ups and downs every single day as we work on this."
Welch just visited Israel and the West Bank and will return shortly to monitor progress towards the withdrawal.