Germany said Wednesday it will resume cooperation with the UN agency for Palestinian refugees after a review found Israel had not yet provided evidence backing its claim that hundreds of staff were members of terrorist groups.

Israel alleged in January that some United Nations Relief and Works Agency (UNRWA) employees may have participated in the October 7 Hamas attacks that triggered the war in the Gaza Strip.

In the weeks that followed, numerous donor states, including Germany, suspended or paused some $450 million in funding.

Many, including Sweden, Canada and Japan, had since resumed funding.

Following the independent review's release on Monday, Germany -- Europe's biggest economy, and a major donor to UNRWA -- said it would also "continue its cooperation" with the agency again.

"Germany will coordinate closely with its closest international partners to disburse further funds," said the German foreign and development ministries in a joint statement.

Germany said it was aiming to support "UNRWA's vital and currently irreplaceable role in providing for the people in Gaza".

UNRWA and other UN agencies must be able to carry out their jobs of distributing aid in the territory, which was "more important than ever in light of the ongoing humanitarian catastrophe in Gaza," the statement said.

The review, led by French diplomat Catherine Colonna, found some "neutrality-related issues" at the agency but noted "Israel has yet to provide supporting evidence" for its claim that UNRWA employs more than 400 "terrorists".

The neutrality issues highlighted included staff sharing biased political posts on social media and the use of a small number of textbooks with "problematic content" in some UNRWA schools.

The Israeli foreign ministry called Germany's decision "regrettable and disappointing".

"Israel shared with Germany and other donor countries detailed information about hundreds of Hamas militants and many hundreds more who are members of the Hamas and Islamic Jihad terrorist organisations, all of whom are UNRWA employees," the ministry said in a statement.

"These are not just a few bad apples -- this is a rotten and poisonous tree," it said.

Berlin called for the report's recommendations to be implemented without delay.

The United States has yet to restore funding to the agency, however, with the White House saying Tuesday it would "have to see real progress" before doing so.

Another UN probe is also looking into Israel's allegations.

The unprecedented Hamas attack on October 7 resulted in the deaths of around 1,170 people in Israel, mainly civilians, according to an AFP tally of Israeli official figures.

Militants also took around 250 hostages, and Israel estimates 129 remain in Gaza, including 34 presumed dead.

In retaliation, Israel launched a military offensive that has killed at least 34,262 people in Gaza, mostly women and children, according to the Hamas-run territory's health ministry.