Prime Minister Gordon Brown announced an additional £30 million of British support for the Palestinian Authority as part of ongoing financial backing for economic and social development in the territories.
Speaking at a press conference with Palestinian President Mahmoud Abbas in Bethlehem, Mr Brown also pledged to expand British help with training for Palestinian police and security forces and said he will host an investment conference in London.
And he said that the security wall erected by Israel along its border with the West Bank was "graphic evidence of the urgent need for justice for the Palestinian people" and an end to the occupation of Palestinian land.
The Prime Minister said that last year's Annapolis conference in the USA had provided an opportunity for peace based on a two-state solution, with a viable Palestine and secure Israel divided along pre-1967 borders and both having Jerusalem as their capital.
But he made clear that progress will depend on securing an end to violence and a resolution to rows over Israeli settlements in the West Bank. Mr Brown said: "As a child, I learned about Bethlehem from the Bible as a symbol of peace and a symbol of hope.
"But today, the wall here is graphic evidence of the urgent need for justice for the Palestinian people and an end to the occupation and the need for a viable Palestinian state."
Earlier after being shown around the Israeli holocaust memorial and laying a wreath, Mr Brown said: "Nothing prepares you for what we see here. This is the story of the atrocities that should have been prevented, the killings that should never have happened, the truth that everybody who loves humanity should know."
He said he was committed to enabling pupils from every school to go on trips to Auschwitz to learn about what happened there. Writing in the condolences book, he added: "We must always remember so that injustice, discrimination, racism and anti-Semitism be banished from our world."
His wife Sarah, accompanying him, wrote: "We shall never forget."
