The US-backed Middle East peace plan known as the roadmap is "out of date" and needs to be revamped, a senior UN human rights envoy says.
The UN says Israel must do more to ensure Palestinian human rights
John Dugard says a new accord was needed taking in "political realities" such as Israel's West Bank barrier.
His report adds that Gaza is still effectively occupied despite Israel's pullout from settlements last summer.
Israel said the report disregarded its "enormous efforts" to fight terrorism, while maintaining humanitarian law.
The report, to be discussed by the UN commission in Geneva next week, said "much more needs to be done by Israel" to meet its human rights obligations.
Strict border restrictions, repeated sonic booms and targeted militant assassinations "serve as a constant reminder to the people of Gaza that they remain occupied", South African-born Mr Dugard said.
Roadblocks and barriers
Mr Dugard says 15,000 people have already been displaced by Israel's West Bank barrier and that it was creating a "new category of Palestinian refugees".
His 22-page report alleges that the barrier is a means to seize land beyond Israel's pre-1967 border and not just to keep out suicide bombers.
He also charges that Jewish settlers in the West Bank are able to "terrorize" Palestinians with impunity, intimidating schoolchildren and destroying trees and crops.
In a separate report published on Wednesday, the UN Office for the Co-ordination of Humanitarian Affairs said Israel had increased the number of roadblocks and barriers in the West Bank by 25% since last summer.
Israel said they were necessary to protect its towns and settlements from Palestinian attacks.
The World Bank has identified Israel's "closure" system as a leading cause for the Palestinians' economic difficulties, and Palestinians have complained that the roadblocks are an excessive, collective punishment.
As special envoy on human rights conditions in the occupied territories, Mr Dugard has been criticised by Israel for past reports critical of the Jewish state and its policies.
Israel's ambassador to the UN in Geneva, Itzhak Levanon, said the new report bore "little reaction to either the facts or existing principles of international law".
"After the full military and civilian withdrawal of Israel from Gaza and the recent accession of the terrorist organisation Hamas into power, the dissonance between [Mr Dugard's] mandate and the present situation has never been clearer," he said in a statement.
Mr Dugard's report was based on a week-long trip to the region in December 2005 before the surprise victory of militant group Hamas in January's Palestinian elections.