 Red Cross workers negotiate access for an injured Palestinian in Gaza |
The statement was an unusual departure from its normally non-political stance.
The ICRC said the measures imposed by Israel had denied the Palestinian population the right to live a normal and dignified life.
But the Israeli government insisted it was co-operating with the Red Cross to ensure the flow of humanitarian aid.
"We are committed to making sure that the people of Gaza continue to receive vital humanitarian and medical support," Israeli government spokesman Mark Regev said.
But the Israeli government also said restrictions could not be eased too quickly, because Palestinian militants would then try to carry out more attacks.
The ICRC says humanitarian assistance cannot possibly be the solution in Gaza and the West Bank.
Its statement comes just days before a major donor conference in Paris.
ICRC
The BBC's Imogen Foulkes in Geneva says politics is not usually a word which features in the language of the international Red Cross - the famously neutral organisation tends to work quietly in conflict zones, and when it does speak, it speaks of numbers of injured treated, or numbers of detainees visited.
But the ICRC now says that life in the West bank and Gaza Strip has become so dreadful that no amount of humanitarian aid can really help.
'Situation perpetuated'
"Why do we call for political action? Because actually we do not think that humanitarian aid can solve the problem," said Beatrice Megevand Roggo, ICRC director of operations for the Middle East.
"In Gaza the whole strip is being strangled, economically speaking, life there has become a nightmare. And for that there is no solution that can be provided by humanitarian organisations.
"We can try to put patches on problems, but we do not have the key to a lasting solution that would address the roots of the problem."
In fact the Red Cross and other UN aid agencies are pouring money into Gaza; senior aid officials, our correspondent says, privately fear they may be perpetuating a situation which really should not continue.
'Dignity denied'
Together with its statement calling for political action, the Red Cross has issued a report called Dignity Denied which paints a harrowing picture of life for the Palestinians - suffering an economic blockade which denies them jobs, medical care, and even food.
"The 1.4 million Palestinians living in the Gaza Strip continue to pay for conflict and economic containment with their health and livelihoods," the report says.
"In the West Bank, the establishment of Israeli settlements affects every aspect of Palestinians' lives and leads to the loss of much land and income, together with recurrent violence by settlers. Exhausting movement restrictions hinder access to work and have led to unprecedented levels of unemployment and poverty.
"Only prompt, innovative and courageous political action can change the harsh reality of this long-standing occupation, restore normal social and economic life to the Palestinian people, and allow them to live their lives in dignity."
The ICRC says it recognises Israel's right to take measures to defend itself.
"[But this] needs to be balanced against the Palestinians' right to live a normal and dignified life," said Ms Roggo.
Also on Thursday, the World Bank said increased aid and Palestinian government reforms will have no real effect unless Israel eases restrictions on travel and trade.
At the donors conference on Monday in Paris, governments are being asked to provide the Palestinians with US $5.6bn over the next three years.
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