The US State Department said last week that Washington would withhold $65 million it had planned to pay the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), saying it needed to make unspecified reforms.
The leaders of the aid groups warned of "dire consequences" if the cut was maintained, according to the letter.
"We are deeply concerned by the humanitarian consequences of this decision on life-sustaining assistance to children, women and men in Jordan, Lebanon, Syria, and the West Bank and Gaza Strip," the letter said.
State Department spokeswoman Heather Nauert on Thursday denied the move was to punish Palestinians, who have been sharply critical of President Donald Trump's announcement last month that he would move the US Embassy to Jerusalem from Tel Aviv.
She repeated the US view that UNRWA needs reform, saying there are a lot more refugees in the program than previously, and that "money coming in from other countries needs to increase as well to continue paying for all those refugees."
"But it is wrong to punish political leaders by denying life-sustaining aid to civilians. This is a dangerous and striking departure from US policy on international humanitarian assistance which conflicts starkly with values that US administrations and the American people have embraced," Schwartz said in the letter.
The State Department also said on Thursday that the United States would not provide a separate $45 million in food aid for Palestinians that it pledged last month as part of the West Bank/Gaza Emergency Appeal led by UNRWA.
Nauert said the United States had made clear to UNRWA that the $45 million was a pledge aimed at helping the agency with "forecasting," but it was not a guarantee.
Trump said in a Twitter post on January 2 that the United States gives the Palestinians hundreds of millions of dollars a year, "but get no appreciation or respect."