The payment is part of a total of $550 million the US pledged to pay to the Palestinians over three years, part of a total of $7.7 billion in pledges from international donors made at a conference in Paris in December.
Fayyad said the US money would go directly to the national treasury, to be used for running the cash-strapped government. Donors often prefer giving money for more prestigious development projects, rather than budget support, and Fayyad said it was significant that the US earmarked the money for government operations.
Fayyad, an economist widely credited with cleaning up Palestinian Authority spending, said he considers the direct payment to the Treasury a show of support.
"We see this as significant, especially because it underscores the confidence with which our financial system is viewed internationally," he said at a signing ceremony with the US consul-general in Jerusalem, Jacob Walles.
Walles called on other donors to fulfill their pledges as well. "A number have already provided assistance in this area, but we look forward to others following our lead in this as well," he said.
The US will also contribute $148 million to the UN Relief and Works Agency, which aids Palestinian refugees, and will disburse more than $200 million in development aid, Walles said.
The international aid is to help the Palestinians provide the economic underpinning for a future state, and to give a boost to the Palestinian private sector. However, the World Bank has warned that the aid will not be effective unless Israel eases restrictions on movement, such as West Bank roadblocks and checkpoints, imposed eight years ago to rein in militants.
"We have to continue to try with the help of the international community to change the context, to remove restrictions, to make it possible for these big infrastructure projects to be implemented," Fayyad said.