A human rights group has called for the creation of an international monitoring body to address human rights violations by Israel and the Palestinians.
Amnesty says military steps are geared to protect settlers not Israel
Amnesty International says the body must have a mandate to investigate and prosecute offenders.
It also denounced the barrier Israel is building in the West Bank and called on Palestinians to end militant attacks.
The report marks 40 years since the Mid-East war which led to Israel's occupation of the West Bank and Gaza.
Amnesty's UK director Kate Allen said Israel could not justify its behaviour in the West Bank under security grounds.
"Legitimate security concerns are no excuse for... the mistreatment of thousands of Palestinians in a massive programme of collective punishment," she said.
In response to the report, Israel's government defended its observance of international law, and Palestinian rights activists said what was needed was a peacekeeping force - not more monitors with no mandate to intervene.
Amnesty says the barrier is being built illegally. This is the conclusion the International Court of Justice came to in an advisory ruling in 2004.
It also says the barrier has caused unnecessary suffering, and even the deaths of Palestinians.
The UK-based group says it is unjustifiable because it does not separate Israel from the West Bank, but curtails Palestinian movement within the occupied territory.
The structure is almost half built, and when finished will be about twice the length of the Israel-West Bank boundary because of loops onto occupied land designed to protect Israeli settlements.
The report, "Enduring Occupation - Palestinians under siege in the West Bank", also criticises government-backed Israeli settlement activity which it says is the reason behind many of the military measures.
Israel rejected the criticism, which Deputy Prime Minister Shimon Peres saying the Palestinians were responsible for their lot.
"The enormous problems caused by the security barrier are the consequences of the second intifada and the buses that the Palestinian suicide bombers coming from the West Bank exploded in Israel."
Amnesty argues that Israeli military measures appear to exist mainly for the benefit of settlements, not citizens living in Israel.
Amnesty says that since September 2000, Israeli forces have killed some 4,000 Palestinians, most of them unarmed civilians and including about 800 children.
Palestinian armed groups have killed more than 1,100 Israelis, some 750 of them civilians and including 120 children.
About a third of the Israeli civilians killed by Palestinian armed groups were settlers in the occupied territories.
Amnesty stressed that the settlers are civilians who should never be targeted.
The group said human rights violations by both sides highlighted the need for an effective international watchdog.
"This must be backed up with a commitment to investigate and prosecute, through the exercise of universal jurisdiction, those who commit war crimes or other crimes under international law."