In a report "Exiled and Suffering: Palestinian Refugees in Lebanon", the London-based human rights group said the refugees face discrimination in education, jobs, health care and housing.
More than half the 400,000 registered Palestinian refugees in Lebanon since their families fled their homes after the creation of Israel in 1948 live in 12 cramped, squalid and often unsanitary camps scattered across the country.
"The continuing restrictions on Palestinian refugees, which effectively render them the status of second-class residents, continue to be little short of a scandal and they should be lifted without further procrastination or delay," Amnesty said.
"The appalling social and economic conditions of those refugees demonstrate forcefully the failure of successive governments in Israel, Lebanon, other regional states and the wider international community to respect and protect their rights, and to find a sustainable and just solution to their plight over a period that now stretches to almost six decades."
Lebanese officials could not immediately be reached for comment.
Restrictions on Palestinians in Lebanon were originally designed to deter them from settling permanently in a country which feared the presence of the mainly Sunni Muslim refugees would upset its delicate internal sectarian balance.
Palestinian guerrillas played a major role in Lebanon's 1975-90 civil war. Armed factions still roam refugee camps which have long been off limits to Lebanese security forces.
Despite a fourfold increase in the registered refugee population, the land area allocated to the camps has barely changed. Amnesty describes it as the "ghetto-ization" of Palestinians.
"The residents have been forbidden by law from bringing building materials into some camps, preventing the repair, expansion or improvement of homes," the report said.
"Those who have defied the law have faced fines and imprisonment as well as demolition of the new structures."
The report also called on Lebanon to make it easier for Palestinian refugees to find employment. Palestinians were barred from about 70 job categories until 2005, when the Labour Ministry reduced the number to 20. Its decision has not been passed into law.
It also called on the government to regularise the status of Palestinian refugees who lack identity papers because they are not registered with the Lebanese authorities or with UNRWA, the U.N. agency that cares for the refugees.
Amnesty urged donors to respond to the Lebanese government's call for funds to rebuild Nahr al-Bared camp after a 15-week battle between the army and Islamist militants destroyed much of it and displaced most of its refugees earlier this year.
© 2007 The Associated Press