Engineer Waheed Borsh, who has worked for the UN Development Programme (UNDP) since 2003, was arrested on July 16 and indicted in a civilian court in Israel on Tuesday, a government statement said.
He is the second humanitarian worker to be charged by Israel in the past week with aiding Hamas, which has run the Gaza Strip since 2007.
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It said he had confessed to a number of charges, including helping to build a jetty in the northern Gaza Strip, with UNDP funding, that was later used by Hamas' naval forces.
In 2015 he allegedly persuaded managers to focus on rebuilding houses in areas where Hamas members lived, after the group put pressure on him.
No figures were provided on how much aid money he is alleged to have diverted.
During the investigation, the statement said, Borsh admitted that "other Palestinians who work for aid organisations are also working for Hamas."
The statement said the charges demonstrate "how Hamas exploits the resources of international aid organisations at the expense of the civilian population of the Gaza Strip".
The formal charge sheet was not yet publicly available.
UNDP told AFP it would be releasing a response very soon.
The government announcement follows the charging on Thursday of the Gaza head of US-based NGO World Vision with diverting millions of dollars of international aid money to Hamas.
According to the Shin Bet internal security agency, Mohammed al-Halabi diverted $7.2 million (6.5 million euros) each year since 2010 to Hamas and its military wing, though his charge sheet does not specify an amount.
Halabi is also accused of recruiting an individual from Save the Children, another international NGO, to Hamas.
World Vision International on Tuesday questioned the allegations, saying the numbers suggested may have been exaggerated.
Its president Kevin Jenkins said in a statement the organisation was conducting an investigation into the allegations but "have not seen any of the evidence".
"World Vision's cumulative operating budget in Gaza for the past ten years was approximately $22.5 million, which makes the alleged amount of up to $50 million being diverted hard to reconcile," the statement read.
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