In January UNRWA launched a $1.4 billion appeal but to date has received just $586 million in pledges.
In a statement to the media, Danon’s office explained that this was not an isolated incident and that weapons and terror tunnels had been found in UNRWA schools in the past.
The legislation is a result of a report by IMPACT-se, which monitors values of peace and tolerance in textbooks.
The donation brings this year's total up to $40 million, to be spent on education and health services.
The UN agency has been hard hit by scandal and the Trump administration withdrawing funding in support of Israel.
The UN is currently investigating the United Nations Relief and Works Agency (UNWRA) following charges of ethical misconduct.
Lebanese-born Palestinian student Ismail B. Ajjawi, 17, arrived in Boston September 2 to join the entering freshman class at Harvard University, following deportation.
UNRWA never questions whether PA schoolbooks should be used by a UN agency that must adhere to the core principles of the United Nations.
The Netherlands and Switzerland have also suspended payments pending the results of the investigation.
Trump’s adviser, Jared Kushner, was quoted as saying that “the plan will require concessions from both sides, but won’t jeopardize the security of Israel.”