The UN has sought to distance itself from the report, which urges national governments to support the BDS movement
Senior UN human rights experts have concluded that Israel is guilty of implementing policies that constitute the "crime of apartheid".
The damning report by the UN Economic and Social Commission for Western Asia (ESCWA) comes after months of discussions on the viability of the two-state solution, as Israel scales up its settlement-building in the occupied West Bank.
The report - titled Israeli Practices Towards the Palestinian people and the Question of Apartheid - was released in Beirut on Wednesday.
The report is co-authored by Richard Falk, former UN special rapporteur on human rights in Palestine, and Professor Virginia Tilley, both prominent critics of the Israeli state. The report concludes that "Israel has established an apartheid regime that dominates the Palestinian people as a whole".
"Available evidence establishes beyond reasonable doubt that Israel is guilty of policies and practices that constitute the crime of apartheid as legally defined in instruments of international law."
UN Under-Secretary General and ESCWA Executive Secretary Rima Khalaf said the report was the "first of its type" from a UN body that "clearly and frankly concludes that Israel is a racist state that has established an apartheid system that persecutes the Palestinian people".
Israeli officials reacted with anger to the report. Israel's Foreign Ministry likened the report to Der Sturmer, a Nazi propaganda publication that was strongly anti-Semitic.
Khalaf said the report had been commissioned by UN member states. However, UN spokesperson Stephane Dujarric told reporters in New York that the report was published without any prior consultation with the UN secretariat.
"The report as it stands does not reflect the views of the secretary-general," said Dujarric, adding that the report itself notes that it reflects the views of the authors.
Secretary-General Antonio Guterres distanced himself from the report, and US Ambassador Nikki Haley said it should be scrapped altogether.
The US on Wednesday demanded that Guterres withdraw the report.
"The United States is outraged by the report," said Haley in a statement.
"The United Nations secretariat was right to distance itself from this report, but it must go further and withdraw the report altogether. That such anti-Israel propaganda would come from a body whose membership nearly universally does not recognise Israel is unsurprising," said Haley.
Israeli ministry spokesperson Emmanuel Nahshon, commenting on Twitter, also noted the report had not been endorsed by the UN secretary-general.
The report urged national governments to join the "boycott, divestment and sanctions" movement targeting the Israeli state.
The report also suggested an advisory opinion be sought from the International Court of Justice "as to whether the means used by Israel to maintain control over the Palestinian people amount to the crime of apartheid".
The report describes Palestinian citizens of Israel as being "subjected to oppression on the basis of not being Jewish," which was based on "detailed analysis of Israeli legislation, policies and practises".
The relationship between the UN and Israel has deteriorated significantly over recent months, since the UN Security Council passed a historic resolution in December 2016 condemning Israeli settlement building in the West Bank.