This paper presents part of the findings of the World Bank sponsored study updating conditions of the transport sector in the Palestinian territories. This study focuses on freight transport; conditions and needed development programs to enable it to play its role in the economy of the upcoming Palestinian state. Freight transport is currently road-based and fully privatized. The number of operating vehicles increased drastically after establishing the Palestinian National Authority. However, due to the current political conditions, which resulted in travel restrictions and road closures by the Israeli authorities, this number sharply declined and some freight companies closed operation. Sizeable percentages of operating vehicles and companies did not renew their registrations because of lack of enforcement and the economic depression. The Israeli imposed measures increased travel distances, time, and costs; therefore, freight transport experienced loss or severe decline in services. Israel controls border points within the West Bank and Gaza Strip, with Israel, and the outside world. Travel between the West Bank and Gaza Strip, which has the only Palestinian airport and the under-construction seaport, is severely restricted. The paper concludes that the priorities are facilitating freight travel within the West Bank and across Gaza Strip, eliminating road closures and movement restrictions, constructing freight land bordercrossings, establishing the free-trade area, and assisting in the consolidation of freight services because it is mainly done by the informal sector. There should be a comprehensive study to evaluate the inter-modal freight transport, at the verge of establishing the Palestinian state.