An official with the U.S. Agency for International Development confirmed that $147 million, which pays for infrastructure, education, humanitarian aid and health projects, had been restored.
In October, Rep. Ileana Ros-Lehtinen, R-Fla, froze $192 million earmarked for assistance to Palestinians as a penalty for their United Nations membership bid in September.
The Palestinians attempted to gain international recognition via admittance to the United Nations, but they did not muster enough support.
The U.S. opposed the United Nations bid, saying it preferred negotiations as a way to resolve the Israeli-Palestinian conflict. Ros-Lehtinen used her power as a lawmaker to place a hold on money Congress had already approved.
Congress later released about $45 million. Then in March, Congress released another $88.6 million, but with strict limitations that the money could not be used for road construction or Gaza aid, among other areas.
Obama announced Wednesday he would override Congress and waive restrictions on all the remaining funds. He explained the move as in the "national security interests of the United States."
Palestinian lawmaker Abdallah Abdallah said the money "will definitely contribute to the betterment of the economic situation, but it's not a substitute for American wrong policy."
He derided the U.S. as "impotent" in criticizing Israeli policies like settlement construction in the West Bank.
Israeli Foreign Ministry deputy spokeswoman Ilana Stein said "the U.S. may allocate its funds as it sees fit," but added, "apparently the Palestinians are developing a sense of entitlement to these funds."