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"Following the PA's support for the Hamas massacres, I asked the Prime Minister to hold an urgent discussion in the Cabinet to examine the continuation of the transfer of funds. Until a decision is made - the funds are stopped," he wrote on social medial platform X, formerly Twitter.
Mr Smotrich said the PA "has once again proven the fact, which we have been raising our voices about for years, that it is a terror-supporting organisation".
"Beyond the connection of these funds to the Gaza Strip and its residents, these funds are used for activities against the State of Israel and its citizens. It is unthinkable that in this reality, we will continue to transfer said funds as if nothing had happened."
The cabinet is set to meet on Monday evening.
Mr Smotrich is a key member of Israel's far-right cabinet, whose controversial judicial proposals sparked Israel's biggest ever protests this year.
Mr Smotrich, who lives in an Israeli settlement in the occupied West Bank, has been widely condemned for his anti-Palestinian remarks and inciting violence in the territory.
Amman also summoned its Israeli envoy over the incident.
Mr Smotrich has stood behind Prime Minister Benjamin Netanyahu as he faces mounting criticism over his handling of the war in Gaza.
Mr Netanyahu was widely criticised on Sunday for claiming the military and intelligence services had repeatedly failed to warn of an imminent Hamas attack.
In a now-deleted online post, he claimed both the army and Shin Bet said Hamas has been "deterred".
"We don't weaken" the army or the Prime Minister, Mr Smotrich posted on Sunday evening.
"We show responsibility ... back up and strengthen each other, even when we are wrong."