US Secretary of State John Kerry on Wednesday unveiled $75 million (56 million euros) in new aid to the Palestinians, aimed at building roads, schools and health clinics.
The money adds to $25 million pledged by the United States in September, bringing the total US contribution for the West Bank infrastructure projects to some $100 million.
In addition Germany is to put up $10 million towards about 200 projects being identified by the Palestinian Authority, which will cost a total of around $50 million.
All the projects are due to start within the next six months.
"We have now committed $100 million to support micro infrastructure initiatives in the West Bank and they will help bring real improvement in the Palestinian communities and lives," Kerry said at a ceremony in Bethlehem to announce the aid.
"Let me tell you what these investments will mean. They will mean more health clinics, better transportation, new community centres and schools."
One of the projects will be to improve three kilometres (two miles) of road in Bethlehem, where according to Christian tradition Jesus was born in a manger.
The aim of the project was to "enhance travel safety, reduce traveller times and promote economic development and tourism," Kerry said, adding that the projects would allow better movement of "tourists and pilgrims to this holy place."
Kerry, who doggedly coaxed the Israelis and Palestinians back to peace negotiations after a three-year hiatus, has frequently stressed the need to boost the Palestinian economy.
"We, the United States, remain deeply committed to a peaceful, prosperous future for both Israelis and Palestinians. And we need to develop the economies to show both peoples that peace has the benefits of economic opportunity and prosperity and a better quality of life," he said.
Shop owner Nabil Giacaman, a third generation wood carver and owner of the Christmas House in Manger Square, welcomed Kerry's visit.
It was "a good thing, to show the world that we are in a good state here, there are no problems, everything is peaceful," he told AFP.
Bemoaning the drop in tourists, he said the visit would let everyone "know there are no problems around Bethlehem, so they can be safe if they visit Bethlehem, the city of Jesus."
Kerry did his own shopping, visiting the nearby Nativity Store where he bought several carved olive wood camels, before heading into talks with Palestinian president Mahmud Abbas.