The Jewish state "began to reduce by eight megawatts electricity flow" into the Palestinian enclave, a statement from Gaza's energy authority said.
The state-run Israeli Electricity Corporation said it had diminished power supplies "in accordance with a government directive".
The Israeli move came after the Palestinian Authority, which is based in the occupied West Bank, informed Israel it would no longer be footing the bill for electricity in Gaza.
The coastal enclave is controlled by Islamist group Hamas, which is at loggerheads with Palestinian president Mahmud Abbas.
Hamas has run Gaza since 2007, when it seized the territory in a near civil war from Abbas' Fatah party in a dispute over parliamentary elections won by the Islamist movement.
Until today, Israel supplied 120 megawatts of electricity to Gaza a month, which made up approximately one quarter of the enclave's needs, with the Palestinian Authority paying the 11.3 million euros (USD 12.65 million) monthly bill.
The Gaza energy authority said Monday's "dangerous" reduction would have "serious effects" in a territory already suffering from chronic power shortages.
The Israeli Electricity Corporation said power "supply will effectively be reduced on two lines out of ten every day, until the reduction applies to all ten lines".
Disclaimer: No Business Standard Journalist was involved in creation of this content
