"The negative effects will be experienced not only by refugees but by Arab states which receive them on their territory," Aboul Gheit said.
According to the secretary general, the flow of refugees has increased due to the Syrian conflict over the past several years, and the Arab states struggle to accommodate all of those who arrive.
"The US decision further aggravates the problems of the Middle East and does not contribute to stability in the region," the official added.
US annual contributions to the agency had amounted to about $350 million out of the $1.2 billion fund the UNRWA administers yearly. The agency has been operating since 1950 to assist Palestinians who lost their homes over the long-standing Israeli-Palestinian conflict.