Israeli Prime Minister Benjamin Netanyahu called Sunday for the dismantling of the U.N. agency that aids millions of Palestinian refugees, accusing it of anti-Israeli incitement and saying he had conveyed his message to the U.S. ambassador to the United Nations.Adnan Abu Hasna, a Gaza-based spokesman for the United Nations Relief and Works Agency (UNRWA), said Netanyahu was pursuing a "fantasy". The United States, Israel's main ally, was the biggest donor to UNRWA last year, pledging $368 million.

In public remarks to his cabinet at its weekly meeting, Netanyahu said UNRWA perpetuated, rather than solved, the Palestinian refugee problem and that anti-Israeli incitement was rife in its institutions, which includes schools.

"It is time UNRWA be dismantled and merged with the United Nations High Commissioner for Refugees," Netanyahu said.

Referring to a meeting he held in Jerusalem on Wednesday with Nikki Haley, the U.S. ambassador to the U.N., Netanyahu said: "I told her it was time the United Nations re-examine UNRWA's existence."

UNRWA was established by the U.N. General Assembly in 1949 after hundreds of thousands of Palestinians fled or were expelled from their homes in the 1948 war that followed Israel's creation. It says it currently aids five million registered Palestinian refugees in the Middle East.