The UN refugee agency (UNHCR) confirmed the incident, adding that the woman in her 50s had been hospitalised suffering severe burns.
Lebanon has in the past three years become home to nearly one million people who have fled Syria's brutal war. Many now live in desperate poverty and rely on overstretched agencies and NGOs for assistance.
Abu Riad al-Amudi, a cart vendor who often works near the UN registration centre in the northern city, said that as hundreds of refugees queued for food aid today morning, a woman dressed in black from head to toe began to shout.
"Then, with her kids standing right next to her, she took a small plastic bottle out of her bag, and poured the contents over her head and clothes. The bottle contained diesel. She took out a lighter and set herself on fire," said a visibly shaken Amudi.
The vendor said he and other bystanders including refugees tried to smother the flames with their jackets and with water.
Hospital director Gabriel al-Sabeh told AFP the refugee had suffered burns to her face and several parts of her body.
Lying in the hospital bed, weeping and barely able to speak, the woman told AFP: "My chest hurts. We don't have any food."
Her face was heavily bandaged and her feet covered in a protective cloth.
Her husband, Khaled al-Daher, was stunned.
"We usually receive aid once a month, but this time it was late," he said.
UNHCR spokeswoman Joelle Eid confirmed the incident, and said the refugee was in "critical condition".
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