Jerusalem's mayor Nir Barkat said Thursday he plans to remove a UN agency for Palestinian refugees from the city, accusing the body of operating illegally and promoting incitement against Israel.

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Barkat said schools, clinics and sports centers, among other services operated by UNRWA in east Jerusalem, will be transferred to Israeli authorities. The municipality did not provide an exact timeline but it said schools serving 1,800 students would be closed by the end of the current school year.

Nir Barkat (Photo: AP)

Barkat, who is set to step down following municipal elections at the end of the month, said the US decision to cut $300 million in aid to the agency earlier this year prompted the move.

"The US decision has created a rare opportunity to replace UNRWA's services with services of the Jerusalem Municipality. We are putting an end to the lie of the 'Palestinian refugee problem' and the attempts at creating a false sovereignty within a sovereignty," Barkat said in a statement, claiming the schools and clinics were illegal and operate without an Israeli license.

Jerusalem's municipality said the move was coordinated with the Israeli government.

UNRWA did not immediately respond to a request for comment.

The agency was founded in 1949 after the first Arab-Israel war—the War of Independence—in the wake of the exodus of around 700,000 refugees who fled or were driven out of Israel on its founding as a state.

As a result, UNRWA now looks after more than 5 million descendants of those original refugees, in Jordan, Lebanon, Syria and the Palestinian territories of the West Bank and Gaza Strip.

UNRWA (Photo: MCT)

The nascent state of Israel absorbed Jewish refugees who were expelled or who fled from neighboring Arab countries, while other Arab states refused to grant the Palestinians citizenship.

Israel argues that UNRWA perpetuates the Palestinian refugee problem by grossly inflating the number of bonafide refugees.

Since the agency includes descendants of Palestinian refugees from the War of Independence, it grants refugee status to Palestinians according to a criteria that is not adhered to in any other refugee question.

In the absence of a solution, the UN General Assembly has repeatedly renewed UNRWA's mandate.

Israeli Prime Minister Benjamin Netanyahu has said UNRWA should be abolished and its responsibilities taken over by the main UN refugee agency.

Some in Israel have even tougher criticism, accusing UNRWA of teaching hatred of Israel in its classrooms and tolerating or assisting Hamas terrorists in Gaza.

The US meanwhile has demanded the agency carry out reforms before it restores funding.