The Palestinian Central Bureau of Statistics said on Tuesday that it has recorded a population of 12.1 million people, of whom 4.6 million live in the occupied territories and the remainder abroad.
The figures show that at the end of 2014, 2.8 million Palestinians lived in the West Bank and 1.8 million in the Gaza Strip.
In the impoverished Gaza enclave, the population of 4.9 people per square kilometre makes its density one of the world's highest.
Of the 4.6 million people in the Palestinian territories, 43.1 percent are refugees.
The balance of 7.5 million Palestinians live in exile, the majority in 31 UN-installed refugee camps in Jordan, Lebanon and Syria. UNRWA, the world body's aid agency for Palestinian refugees, has 5.49 million people registered in its books.
The figures were announced ahead of Friday's 67th anniversary of the "Nakba", or "catastrophe" in Arabic, the day when Palestinians mourn Israel's establishment in 1948.
In a statement, the head of the statistics bureau said that in 1948, "1.4 million Palestinians lived in 1,300 towns and localities in historic Palestine".
After the war that followed Israel's creation, "Israel took control of 774 towns and villages, destroyed 531 and committed 70 killings and massacres in which 15,000 people died", she said.
Some 154,000 Palestinians decided to remain on their land after that conflict, and their Arab Israeli descendants now number nearly a million and a half.
Other figures made public by the Association for Civil Rights in Israel NGO show that Palestinians make up 37 percent of the population of Jerusalem.
The eastern part of the holy city was captured in the 1967 Six-Day War and later annexed in a move never recognized by the international community.
Of the Palestinians in East Jerusalem, 75 percent live below the poverty line.
The illegal Israeli settlements in East Jerusalem have escalated tensions, triggering social unrest between Israeli settlers and Palestinians.
Despite severe criticism from the U.S., the EU and the U.N., Israel continues to expand the settlement project that includes major construction in areas by demolishing homes belonging to Palestinians in the disputed area. The number of Jewish settlers in the occupied territories has doubled in the last four-and-a-half years. The continued settlement threatens the pursuit of peace in the sacred territories through deepening divisions between the two communities and further exacerbating the conflict.