The Trump administration is preparing to withhold tens of millions of dollars from the U.N. agency for Palestinian refugees, cutting the year’s first contribution by more than half or perhaps entirely, and making additional donations contingent on major changes to the organization, according to U.S. officials.

President Donald Trump hasn’t made a final decision, but appears more likely to send only $60 million of the planned $125 million first installment to the U.N. Relief and Works Agency, said the officials, who weren’t...