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The agency operates schools, clinics and sports centres for thousands of Palestinians in east Jerusalem.
The decision was reportedly made at a meeting earlier this month between President Donald Trump's advisor Jared Kushner and Secretary of State Mike Pompeo.
In January, the US, the largest donor to the agency, slashed some $300 million from its annual contribution to UNRWA, prompting an unprecedented financial crisis.
Avnery, who fought for the creation of a Palestinian state and was one of the first Israelis to meet Yasser Arafat, has died aged 94.
The UN Secretary-General has presented four options to protect Palestinians as Israeli aggression leaves over 170 Palestinians dead.
Wissam Yousef Hijazi passed away on Monday after battling his wounds which he sustained as a result of brutal Israeli tactics on the besieged Gaza Strip for months.
Ahmed al-Ayeda was shot by Israeli forces on the first day of the Great Return March protests.
US President Donald Trump's senior adviser and son-in-law Jared Kushner reportedly pressured Jordan to strip more than two million Palestinians of their refugee status.
Niraz Saied, who hailed from the Palestinian Yarmouk refugee camp in Damascus, was arrested by Bashar al-Assad's security forces in October 2015.
A four-way land-swap deal proposed by Israel in 2009 could have most of the occupied Golan Heights go back to Syria.