The wall runs so close to the two nearby restaurants still operating that they have painted their menus on its surface, while other businesses are long closed, the erection of the barrier cutting off the once-vibrant strip from the rest of Bethlehem.

Hundreds of kilometres long, the barrier, which Israel began building 10 years ago, snakes through East Jerusalem and the West Bank, crippling business and agriculture, isolating communities and separating families from their loved ones, a new report from the Israeli human rights organisation B'Tselem has found.

Initially touted as a ''a temporary security measure for the prevention of terror attacks'' during the second intifada when Palestinian suicide bombings were at their peak, it has since been referred to by senior Israeli government officials as marking the future border of Israel.

The report quoted the Israeli justice minister in 2005, Tzipi Livni, as saying the separation barrier would serve as ''the future border of the State of Israel'' and the current Defence Minister Ehud Barak as telling Israeli Army Radio in 2007: ''When we build a barrier, clearly there are areas beyond the barrier, and it is clear that, under a permanent settlement agreement … these areas beyond the barrier will not be part of the State of Israel.''

At 439 kilometres it is 62 per cent complete, the United Nations Office for the Co-ordination of Humanitarian Affairs said. But if it runs to the planned 708 kilometres, the wall will be more than twice the length of what is known as the Green Line, the 1949 armistice line between Israel and the West Bank.

''The barrier's route, determined in part by the location of many of Israel's West Bank settlements, creates the infrastructure for de facto annexation of most of the settlements and settlers,'' the report says. ''And the barrier, like the settlements, leads to numerous infringements of the human rights of Palestinians, over and above the direct damage inflicted by its construction.''

Israel's Ministry of Defence has consistently defended the barrier, saying in a statement that the ''design, construction and operation of the security fence aim to balance the imperative to protect innocent lives from terror with the day-to-day needs of the local Palestinian population''.

During the second Palestinian intifada, between 2000 and 2005, Israel lost more than 1000 citizens in terror attacks, the ministry said. ''Since construction of the fence began, this number has dropped sharply.''

Agriculture is one of the areas most affected by the barrier.

''Fully 10.2 per cent of the cultivated farmland of the West Bank, with a combined agricultural production value of $US38 million [$A36.5 million] annually - about 8 per cent of the total Palestinian agricultural production - is isolated on the 'Israeli' side of the barrier,'' B'Tselem's report said.

One of the worst-affected villages is Bartaa al-Sharqiya, in the northern West Bank. Home to 4575 Palestinians, Bartaa al-Sharqiya is enclosed by the wall, which separates it from the district hub of Jenin, as well as the towns of Yaabad and Qaffin, which supply the residents with food, health and education services.

It bears the brunt of the complicated, military-administered permit system Palestinians must negotiate every time they cross the barrier to reach their farmlands, jobs, businesses, education or health facilities.

Back in Bethlehem, just 15 minutes from the centre of Jerusalem, Claire Anasta despairs about the future for her family and her business.

Before the wall cut her family in two, she could just walk across the road to visit her aunt and uncle. Now she must travel kilometres away and through a refugee camp to reach their home, only metres from her front door. ''This wall is built in the heart of Bethlehem, separating people inside Bethlehem itself,'' Mrs Anasta said.