The city-state's media regulator said the film, "Radiance of Resistance", had a "skewed narrative" and could cause divisions among its ethnically diverse population.
Most of Singapore's 5.6 million inhabitants are ethnic Chinese but it is also home to substantial Muslim Malay and Indian minorities, as well as many expatriates. It has strict laws against anything seen as provoking disharmony.
The film was due to be shown Thursday at the Singapore Palestinian Film Festival, which showcases works by Palestinian filmmakers and artists and has been running since 2016.
The banned work looked at the lives of two young girls presented as the new faces of Palestinian resistance to the Israeli military occupation.
One of the girls, 16-year-old Ahed Tamimi, has been hailed as a hero by Palestinians who see her as bravely standing up to Israel's occupation but Israelis accuse her family of using her as a pawn in staged provocations.
She was charged in an Israeli military court Monday with several offences, including assault, after a video of her kicking and slapping two Israeli soldiers in the West Bank went viral.
"In holding up the girls as role models to be emulated in an ongoing conflict, the film incites activists to continue their resistance against the alleged oppressors," Singapore's Infocomm Media Development Authority said on its website.
"The skewed narrative of the film is inflammatory and has the potential to cause disharmony amongst the different races and religions in Singapore."
Film festival organiser Adela Foo told AFP she respected the decision and would not appeal.
"Naturally, I am a little sad and disappointed," said Foo, a 23-year-old student. A film was also banned at the 2016 edition of the festival, she said.
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