The report acknowledges the right of Israel to exist and that the occupation is causing "great suffering" to both Israelis and Palestinians, but expresses particular concern over the "humiliation" and "weakened" morale of Palestinians as a result of checkpoints and restrictions on their freedom.
"The intricate, pervasive system of checkpoints and barriers which dominate the lives of the majority of Palestinians means that they have little or no control over the essential transactions of everyday life," it states.
The report goes on to stress the illegality under international law of the construction of Israeli settlements on Palestinian territory.
"Their existence and growth constitutes a major obstacle to a just and sustainable peace in the region," it states.
The report raises concern over the plight of the Christian population on both sides of the divide, and affirms the need for a "deepening relationship" between them and British Methodists.
It commits the Church to continue engaging in a "robust analysis" of the theological issues surrounding the conflict, including Zionism, and to helping members and wider society become better informed about the complex factors playing into the conflict.
Responding to "serious concerns" raised by the Jewish community, the Rev Graham Carter, Chair of the working group that compiled the report, insisted that it did not represent a "one-sided picture", noting its call to Palestinian armed groups to respect humanitarian laws by renouncing attacks on civilians.
"We hope that the stories of occupation and the separation wall will enable people to understand more the conditions under which Palestinians live but we also acknowledge the fear and threat that many Israelis feel," he said.
He also refuted any suggestion that the report was anti-Semitic.
"There is no hint of anti-Semitism in what we have said. We are between a rock and a hard place and sometimes we need to be equivocal about what we feel and sometimes we need to be a bit more 'Pauline' and now is the time we have to make a clear stand," he said.
The report will be sent out to local churches, circuits and districts for reflection. They are being encouraged to pray regularly for the lasting peace between the two sides.
Other recommendations urge Methodists to write to their MPs voicing their opposition to the occupation, to visit the region, and to engage in respectful dialogue with interfaith colleagues.
Rev Carter added: "I hope we can continue that dialogue. I want the Methodist Church to continue to hold out the hand of friendship and I hope it will not be refused."