"All stations in Gaza have been shut down because there is no fuel of any kind," Mahmud al-Khuzudnar, a deputy chief of a Gaza association for petrol stations, said on Sunday.
Israel provides Gaza with all of its fuel but has delivered only restricted supplies since October 28, a month after declaring Gaza a "hostile entity" following its forced takeover by Hamas.
Last week Israel scaled back deliveries even further, officials said.
An official from the Palestinian petrol authority at the Nahal-Oz crossing - through which all fuel enters Gaza – told the AFP news agency that Israel has delivered around 190,000 litres of diesel a day since late October, instead of the necessary 350,000 litres.
Last Thursday it delivered only 60,000 litres and on Sunday only 90,000 litres, he said.
Shady Yassin, a spokesman for the Israeli military liaison office with Gaza, said "the reduction was because of Palestinian Authority debts to Dor," the Israeli company that supplies the fuel.
In Ramallah, Mohammed Kamal Hassuneh, the Palestinian economic minister, said that the Palestinian Authority (PA) has honoured all of its debts and that the sudden decrease in fuel was due to a broken pipeline.
"The crisis today is not related to money," he said. "There is a broken pipe near Shujaiya [near Gaza City] and they are trying to fix it."
The limited fuel quantities reaching Gaza would not be released for sale in protest at the cuts, Khuzudnar said, adding that it would go into storage instead.
Hardened by a year of economic turmoil, Gazans have been stocking up on fuel supplies for weeks but worry their supplies may run out in the near future.
"I have about two weeks' worth of fuel for my car in my garage, but after that I'll have to stop using it," Abed Lubad, who works in a Gaza hospital, said.
Since Hamas seized control of Gaza in mid-June, Israel has sought to isolate the strip in response to continuing rocket fire from the territory.
It has further tightened restrictions on the movement of goods and people in and out of the territory, one of the world's most densely-populated areas.
Israeli and Palestinian human rights groups had appealed to Israel's supreme court to halt the fuel cuts, calling them an act of illegal collective punishment that endangers civilians.
But on Friday the court said the state could continue with the restrictions, saying it was possible to do so without affecting the humanitarian situation in Gaza.
The court however ordered the state to provide additional information on the strip before it ruled on an appeal against planned cuts in electricity supplies.
The final court decision on the planned power cuts is not expected for another three weeks.