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The UN agency for Palestinian refugees is vowing to continue operations in Jerusalem despite Israeli plans to remove it.

The Relief and Works Agency, or UNRWA, said on Saturday that education, health care and other services to Palestinian residents of east Jerusalem are “important work.”

On Thursday, Jerusalem Mayor Nir Barkat said Israeli authorities will take over UNRWA’s services, most notably schooling for 1,800 students, without giving an exact timeline.

UNRWA has operated in east Jerusalem, which Palestinians demand as a future capital, since Israel occupied it in 1967. The Trump administration, however, cut $300 million in annual aid to the agency, demanding reforms.

The agency was established following the 1948 Mideast war that led to Israel’s creation.

Today, it aids 5 million Palestinians, mostly refugee descendants. Israel says this perpetuates conflict with the Palestinians.

The issue of Palestinian refugees - along with the status of Jerusalem - has long been a major sticking point in peace efforts.

More than 750,000 Palestinians fled or were expelled during the 1948 war surrounding Israel's creation.

They and their descendants are now classified as refugees who fall under UNRWA's mandate.

Palestinian leaders continue to call for at least some of them to be allowed to return to their former homes now inside Israel under any peace deal.

Israel says Palestinians must give up the so-called right of return and that allowing descendants of refugees to inherit their status only perpetuates the problem instead of solving it.

Around 5 million registered Palestinians refugees are eligible for UNRWA services in the Israeli-occupied West Bank, the blockaded Gaza Strip, Jordan, Lebanon and Syria.

On Friday, the UNRWA said it was "determined to continue to carrying out" its services in east Jerusalem and criticised Barkat's plan.

"Such messaging challenges the core principles of impartial and independent humanitarian action and does not reflect the robust and structured dialogue and interaction that UNRWA and the State of Israel have traditionally maintained," the agency said.