The International Committee of the Red Cross has for the first time called on Israel to end its blockade of the Gaza Strip.
In an unusually critical statement, the neutral humanitarian agency says the blockade is a collective punishment of Gaza's civilian population and is in clear violation of international law.
The Red Cross call comes as Israel announced that two foreign observers will join an inquiry it is to conduct into a deadly raid last month on a Gaza-bound aid convoy that left nine activists dead and dozens injured.
The International Committee of the Red Cross says Israel's blockade of the Gaza Strip violates the Geneva Conventions and has called for its lifting.
It says Israel's raid on the aid flotilla highlighted acute hardships faced by 1.5 million Gazans since 2007. The agency says Palestinians there endure unemployment, poverty and warfare, and healthcare whose quality is at an all time low.
It was the first time the agency has said explicitly that Israel's blockade constitutes a violation of international humanitarian law embodied in the Geneva Conventions.
Amid an international outcry over the aid flotilla deaths, Israel has faced mounting pressure to investigate the events surrounding the flotilla raid and to ease or lift its blockade on the Hamas-ruled Gaza Strip.
Israel said its commandos killed nine pro-Palestinian Turkish activists when they boarded a Turkish-flagged aid vessel on 31 May, after they were attacked by passengers wielding metal rods and knives.
The internal inquiry panel will include two foreign observers, the Israeli prime minister's office says, but the announcement falls short of a United Nations proposal for an international investigation.
The investigation was decided on after consultations with the United States. The White House has welcomed the move as an important step.
Middle East peace envoy Tony Blair says the Israeli government has told him it is prepared to ease the blockade on some items provided they do not jeopardise security.
Prime Minister Benjamin Netanyahu said on Sunday that Israel would continue discussions with the international community to prevent weapons and military equipment from reaching Gaza and to allow in humanitarian aid.
Later, Iranian President Mahmoud Ahmadinejad called on Israel to lift its blockade of Gaza.
Speaking on state-run television on the anniversary of the country's disputed presidential election, he also predicted that Israel was about to collapse.