The report said the Quartet had failed to halt settlement expansion
The Quartet of international powers has "lost its grip" on the Middle East peace process which it is meant to foster, a group of aid agencies says.
In a damning report, the agencies say the Quartet - Russia, the US, the EU and the UN - is failing in its mission.
Conditions for Palestinians, which it was meant to improve, have worsened since peace talks recommenced under US sponsorship in 2007, the agencies say.
In the West Bank there was an increase in Israeli settlement and travel curbs.
The report was issued ahead of a Quartet meeting in New York on Friday.
"The Annapolis process [launched by the US in November 2007] was meant to herald a new dawn for the Middle East peace process," said Christian Aid director Daleep Mukarji.
"Nearly one year on, we are seeing exponential settlement growth, additional check-points and - because of this - further economic stagnation.
"The Quartet is losing its grip on the Middle East peace process."
There has been no immediate response from the Quartet, whose representative in the region is former UK Prime Minister Tony Blair.
The Bush administration wanted the November 2007 peace summit at Annapolis to lead to a peace deal between Israelis and Palestinians before it left office but this is looking increasingly unlikely.
The coalition of 21 aid agencies - including Oxfam, Save the Children, Care, Cafod and World Vision - warned that the peace process would fall apart unless the Quartet made swift and dramatic progress towards its goals.
The report says there has been no change in a number of the 10 main objectives set by the Quartet to help improve the daily lives of the Palestinians and in five of them an actual deterioration.
It had failed to hold Israel to account for expanding the settlements on occupied land, the report added.
The agencies say this week's Quartet meeting would take place at "a critical moment to demonstrate that it can play an effective role in bringing peace to the Middle East".
"Unless there is a swift and dramatic improvement, it will be necessary to question what the future is for the Middle East Quartet," it said.
"We are facing a vacuum in leadership," said Care International representative Martha Myers. "The Quartet's credibility is on the line."