The UN chief made clear that he would not retreat from the broadside he directed at Israel over its expansion of Jewish settlements in the West Bank.
UN diplomats said privately that Ban had upped the pressure on Netanyahu in a final bid to revive hopes for peace before he steps down as secretary-general at the end of the year.
"After nearly 50 years of occupation -- after decades of waiting for the fulfilment of the Oslo promises -- Palestinians are losing hope," Ban told a UN committee on Palestinian rights.
"Young people especially are losing hope. They are angered by the stifling policies of the occupation."
Netanyahu on Tuesday accused Ban of "encouraging terror" after Ban said that it was "human nature to react to occupation."
Speaking to the UN committee, Ban reiterated that "nothing excuses terror," but added that a security clampdown will not succeed in settling the Israeli-Palestinian conflict.
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The UN chief called for a return to negotiations, saying it was the "one and only path to a just and lasting solution -- an end to the occupation that began in 1967" and a Palestinian state.
"You can count on me to continue to speak up and speak out -- to push and to prod -- to do all in my power to achieve long-overdue Israeli-Palestinian peace," he said.
Ban said Palestinians had heard "half a century of statements" condemning Israel's occupation, but that their lives had not improved.
"We issue statements. We express concern. We voice solidarity. But life hasn’t changed. And some Palestinians wonder: Is this all meant to simply run out the clock?
"They ask: Are we meant to watch as the world endlessly debates how to divide land while it disappears before our very eyes?"
The UN chief's sharp criticism of Israel came amid ongoing Israeli-Palestinian violence and recent Israeli decisions to build new Jewish settlements in the West Bank.
The United Nations has branded Israeli settlement expansions illegal, arguing that they are an attempt to undermine plans for a Palestinian state by absorbing land earmarked for the new country.