The barrier was the first stop on a visit to Israel and the Palestinian territories for Waters, who had been criticized by some fans for planning to play a concert in the Jewish state.
"It's a horrific edifice, this thing," Waters told reporters as he stood beside a section of the barrier in Bethlehem.
Another brick in the wall (Photo: AP)
"I've seen pictures of it, I've heard a lot about it but without being here you can't imagine how extraordinarily oppressive it is and how sad it is to see these people coming through these little holes," he added. "It's craziness."
Waters added to graffiti with red spray paint and a marker pen.
Waters was lyricist, songwriter and singer for Pink Floyd, the former British rock group famous for "The Wall" and "The Dark Side of the Moon."
Israel has built almost half the fence, which has the stated aim of keeping suicide bombers out of its cities.
Condemned by Palestinians as a land grab, the fence has been branded illegal by the World Court because it cuts through occupied territory. Israel is rerouting some sections after a Supreme Court order to lessen Palestinian hardship.
From Tel Aviv to Neve Shalom
Waters is due to perform a concert at the Arab-Jewish coexistence village of Neve Shalom on Thursday as part of his world tour.
The concert was originally planned for a Tel Aviv sports stadium but, following criticism by fans in Britain, Waters changed the location to the peace village, where Israeli Jews and Arabs live in a joint community.
In 1990, Waters performed "The Wall" along the Berlin Wall that separated East and West Germany to celebrate reunification.
He told reporters he hoped Israel's fence would also be brought down one day.
"It may be a lot harder to get this one down, but eventually it must happen," Waters said.