A World Bank report blames Palestinian mismanagement and Israeli restrictions for severe water shortages in Palestinian areas.
Palestinians get only a quarter of the water Israelis have access to.
The existing problems effect not just daily supply but the development of water resources, water uses and wastewater management.
"Water related humanitarian crisis are in fact chronic in Gaza and parts of the West Bank," says the report.
For their water Palestinians in the West Bank and the Gaza Strip are completely depended on scarce resources controlled by Israel.
This has led to "systematic and severe constraints on Palestinian development of water resources", says the report.
But the Palestinian Authority (PA) too gets part of the blame. It is struggling to establish even a basic water infrastructure and management, concludes the report.
Water supplies continue to "operate in a very inefficient emergency mode, with far reaching economic, social and environmental consequences".
The mismanagement is made worse by movement and access restrictions which Palestinians live under. As a result Israelis have about four times as much water available to them as people in the West Bank and Gaza.
Israeli officials said the report was "grossly misleading" as Israel has a much more developed industrial sector which could skew the assessment.
But in Gaza 150,000 Palestinians have no access to tap water at all, a report in the Palestine Telegraph says.
According to the local utility provider, several wells have been destroyed during the Israeli offensive earlier this year.
Since then only three out of 80 trucks with spare parts and pipes for the water system have been allowed to enter Gaza.
As a result the severe damages to two wastewater treatment plants could not be repaired and continue to affect water quality.