Israel is denying Palestinians access to even the basic minimum of clean, safe water, Amnesty International says.
In a report, the human rights group says Israeli water restrictions discriminate against Palestinians in the occupied West Bank.
It says that in Gaza, Israel's blockade has brought the water and sewage system to "crisis point".
Israel says the report is flawed and the Palestinians get more water than was agreed under the 1990s peace deal.
'Basic need'
In the 112-page report, Amnesty says that on average Palestinian daily water consumption reaches 70 litres a day, compared with 300 litres for the Israelis.
 |  Israel must end its discriminatory policies, immediately lift all the restrictions it imposes on Palestinians' access to water  Donatella Rovera Amnesty International |
It says that some Palestinians barely get 20 litres a day - the minimum recommended even in humanitarian emergencies.
Amnesty says that Israel denies West Bank Palestinians to dig wells, and has even destroyed cisterns and impounded water tankers.
At the same time, the report claims, Israeli settlers are enjoying swimming pools and green gardens.
In Gaza, Israel refuses access to many of the building materials needed to renovate the ailing water system, the document says.
It adds that Israel uses more than 80% of the water from the Mountain Aquifer - the main source of underground water in Israel and the occupied Palestinian territories.
"Water is a basic need and a right, but for many Palestinians obtaining even poor-quality, subsistence-level quantities of water has become a luxury that they can barely afford," Amnesty's Donatella Rovera said.
"Israel must end its discriminatory policies, immediately lift all the restrictions it imposes on Palestinians' access to water."
Ms Rovera also urged Israel to "take responsibility for addressing the problems it created by allowing Palestinians a fair share of the shared water resources".
Israeli government spokesman Mark Regev said the report was factually inaccurate, accusing the Palestinians of mismanaging water resources.
He also rejected the claim that Israel was preventing Palestinians from drilling for water.
The spokesman said Israel had approved 82 such projects but the Palestinians had only implemented 26 of them.
