"Poverty and deprivation, which were widespread before the operation [Israel's war on Gaza], have worsened still further," the report said.
"Absurdly, Israel's decision to prevent imports and exports has encouraged the development of the tunnels economy between the Gaza Strip and Egypt, which is controlled by Hamas and increases its power."
B'Tselem also denounced what it described as a culture of impunity within the Israeli security forces.
"From the soldier at the checkpoint to the top echelon of the army and government, accountability for harming Palestinian civilians is the exception rather than the rule," it said.
The report also criticised continued settlement growth in the West Bank as a violation of several Palestinian rights, including "the right to housing, to a livelihood, and to freedom of movement".
B'Tselem's report acknowledged, though, that the human rights situation in the occupied Palestinian territories has "improved in several important ways". Israel had reduced the number of manned checkpoints in the West Bank to 44 by the end of February, for example, down from 63 in 2008.
Eighty-three Palestinians were killed by Israeli forces between the end of the Gaza war, in January 2009, and April 2010. More than one-third of them were not engaged in hostilities, the group said. That compares with 456 Palestinian deaths in 2008.
During the same period, Palestinian fighters killed three Israeli civilians, compared with 21 in 2008; and four members of Israel's security forces were killed, as opposed to 10 in 2008.
None of B'Tselem's figures include casualties from the three-week Gaza war, during which more than 1,100 Palestinians were killed along with 10 Israeli soldiers and three Israeli civilians.
B'Tselem was founded in 1989 by a group of Israeli lawyers, academics, journalists and politicians to document human rights abuses in the occupied Palestinian territories.