Palestinians accuse the Jewish state of having scrapped hundreds of travel documents allowing them to enter Israel and the West Bank as well as other countries for trade.
The permits are crucial to the economy of the impoverished Gaza Strip, on the brink of collapse after a 10-year Israeli blockade, according to the World Bank and United Nations.
Israel says the blockade is necessary to prevent the Islamist movement Hamas, which runs the strip, from rebuilding its military forces and positions.
COGAT, the defence ministry body responsible for implementing government policies in the Palestinian territories, refused to comment on Monday.
But an Israeli official confirmed to AFP: "There are currently 1,600 trading permits, compared to 2,800 in the same period in 2015."
Signup to our newsletter and follow us on Facebook and Twitter!
Walid al-Hosary, chairman of the Gaza chamber of commerce, said that "more than 1,500 permits and more than 160 authorisation cards for merchants and businessmen have been withdrawn."
Israel had cited "security reasons", he told the demonstrators at the Erez crossing.
Also, "the entry into the Gaza Strip of many of the necessary raw materials and goods for the industrial sector have also been prevented," he said.
"We also call for more neutrality in the private sector and for it not to be mixed in any political decisions, because traders, businessmen and industrialists do not have anything to do with political matters," Hosary said.
Wedged between Egypt, Israel and the Mediterranean, the Gaza Strip is home to about 1.9 million Palestinians.
Israel controls all but one of the crossing points with Gaza -- the Rafah crossing into Egypt.