Kirstie Campbell, spokeswoman for the WFP, said that 46 per cent of Palestinians are now food insecure or vulnerable.
In 2004, 35 per cent of Palestinians were food insecure, she said.
"Many people, who cannot afford to buy food, have been forced to sell off valuable assets such as land or tools," the report said.
To tackle the growing need, the WFP increased its food assistance by 25 per cent in the past year, feeding about 260,000 non-refugees in Gaza and 400,000 in the West Bank.
Another UN agency, UNRWA, handles food distribution for refugees.
Arnold Vercken, the WFP country director, said: "The poorest families are now living a meagre existence totally reliant on assistance, with no electricity or heating and eating food prepared with water from bad sources.
"This is putting their long-term health at risk."
Campbell called the increased humanitarian assistance a "Band-Aid" solution that did not offer a permanent solution to the economic problems of Palestinians.