Israel is withholding about $100 million in monthly customs revenues it collects on the Palestinians' behalf as punishment for their successful bid at the U.N. General Assembly last month to gain de-facto statehood recognition.
The Palestinian Authority, which exercises limited self-rule in the West Bank, was suffering a deep financial crisis even before the move, and has had to delay payments to its 153,000 public sector workers several times this year.
Around 50,000 workers took part in Wednesday's stoppage. West Bank security forces and staff in the Gaza Strip did not participate.
"This strike is against Israel's piracy," said Bassam Zakarneh, chief of the government employees' union.
"The situation is very grave and the services to the people are much reduced by the strike," he said. "(People) can't even afford transportation to their workplaces."
The Palestinian Monetary Authority announced on Wednesday local banks would offer the government a $100 million loan ahead of hoped-for transfers of aid by Arab donors.
The cash advance would enable the government to make partial payments of late salaries, the finance ministry said.
Government workers last received salaries for October, which were paid belatedly at the end of November. There was no word on when November or December wages would be handed over.
Israel said the unilateral Palestinian U.N. initiative contravened peace accords and has threatened to withhold tax returns for four months to cover outstanding Palestinian debts with Israeli utility firms.
Strikes and protests over austerity measures turned violent in September. Demonstrators pelted security forces with rocks and called for the ousting of Palestinian Prime Minister Salam Fayyad and President Mahmoud Abbas.
Wednesday's action appeared much more subdued and there were no public protests, with Palestinians blaming Israel rather than their own government for their economic woes.
"This puts about a million citizens in Palestine in the cycle of poverty," said Fayyad, speaking of the Israeli sanctions.
"We're talking about doubling the rate of poverty in Palestine during a maximum period of two months from today if the situation continues as it is," he told Reuters on Monday.
Arab countries have yet to fulfill pledges to offset the Israeli measures with cash donations.
(Reporting By Ali Sawafta and Noah Browning in Ramallah; editing by Crispian Balmer)