A formal announcement with respect to the United Nations Relief and Works Agency for Palestine Refugees in the Near East, known as UNRWA, is expected in the next few weeks. The administration is expected to criticize the way the organization operates.
Foreign Policy first reported the Trump administration's decision to end funding for the UN agency. The United States has for long been the biggest individual donor to UNRWA, established by the UN General Assembly in 1949.
The administration official told CNN the decision was made at a meeting between Jared Kushner, US President Donald Trump's son-in-law and a White House senior adviser, and Secretary of State Mike Pompeo, but that US Ambassador to the UN Nikki Haley had also been pushing for the move.
The White House did not immediately return a request for comment on the decision.
UNRWA offers educational, health and social services across the West Bank, Gaza, Jordan, Syria and Lebanon to registered Palestinian refugees. The agency educates about 500,000 children in nearly 700 schools and its doctors see more than 9 million patients in nearly 150 primary health clinics every year.
A senior administration official criticized the agency in a statement to CNN earlier this month, saying that it "has perpetuated and exacerbated the refugee crisis and must be changed so the Palestinian people can reach their full potential."
The statement followed a Foreign Policy report in early August that revealed leaked emails in which Kushner pressed fellow officials to engage in "an honest and sincere effort to disrupt UNRWA."
Removal of Palestinians' refugee status would effectively mean they would lose the "right of return" to homes that are now in Israel and reclaim lost property -- a move that would have enormous significance for the approximately 5.3 million Palestinian refugees registered with UNRWA.
During the Arab-Israeli War of 1948/49, which followed the establishment of the State of Israel, about 700,000 Palestinians were expelled from or fled their homes, a period the Palestinians call "Nakba," meaning catastrophe.
Most Palestinians consider the right of return to be an inalienable right of the Palestinian people. It has long been considered what is called a "final status" issue in peace talks, an acknowledgment that it is among the toughest areas for Israelis and Palestinians to reach agreement.
This would be the second final status issue that the US President has sought to take off the table, the first being Jerusalem.
For decades, US policy was to avoid declaring Jerusalem the capital of Israel in the absence of an Israeli-Palestinian peace deal, as the Palestinians also claim Jerusalem as their capital and its final status was supposed to be left to negotiations. But Trump upended that policy in December when he recognized Jerusalem as Israel's capital.
Al-Awda, a Florida-based NGO that advocates for the right of return, talks of the "fundamental, inalienable, historical, legal, individual and collective rights of all Palestinian refugees to return to their original towns, villages and lands anywhere in Palestine from which they were expelled."
News that the Trump administration will end all funding to UNRWA comes on the heels of Trump ordering the United States to cut $200 million in aid to Palestinians.
CNN reported last week that the President directed the State Department to withdraw $200 million in aid that was originally planned for programs in the West Bank and Gaza, according to a senior State Department official.
Ahmad Shami, a spokesman for Palestinian Authority Prime Minister Rami Hamdallah, accused the Trump administration in a statement earlier this week of seeking to strip millions of Palestinians of their refugee status on top of cutting aid funds.
"After using humanitarian aid to blackmail and pressure the Palestinian leadership to submit to the empty plan known as 'the deal of the century,' the Trump administration plans to commit an immoral scandal against Palestinian refugees by giving itself the right to abolish the historical rights of Palestinian refugees without any legitimacy," he said.
"This is a clear looting of our humanity leading to more chaos in the region."
Shami called on the international community to "stop the gambling schema of Trump and Netanyahu to endorse colonization, apartheid, and denial of Palestinian fundamental rights."
Israeli Prime Minister Benjamin Netanyahu has frequently said the work done by UNRWA should be picked up by the UN's main refugee agency, the UNHCR.
Netanyahu told foreign journalists in January: "The perpetuation of the dream of bringing the descendants of refugees back to Jaffa is what sustains this conflict. UNRWA is part of the problem, not part of the solution."
Jaffa was one of the largest Arab towns in British Mandate Palestine that would become part of Israel in 1948.
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