The week-long visit was planned for 37 children whose parents were killed by Israel in the Gaza Strip in July and August this year. It was organised by an Israeli kibbutz group and local Arab-Israeli officials.
Kibbutz Movement spokesman Yoel Marshak told AFP that the trip was supposed to allow the Palestinian children, aged between 12 and 15, "to circulate and learn about Israeli children their age".
The group had been due to visit several Israeli kibbutzim close to the Gaza Strip and travel to Ramallah in the occupied West Bank to meet Palestinian president Mahmud Abbas, Marshak said.
But Hamas, which has controlled Gaza since 2007, said the trip was cancelled as the children would have "had to visit settlements and occupied towns".
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The Islamist movement's interior ministry said the visit was forbidden in order to protect the children from "the politics of normalisation" with Israel.
An AFP photographer saw Hamas security officers turn the 37 orphans away from the Erez border crossing with Israel today.
Nearly 2,200 Palestinians were killed during the July-August war, mostly civilians, and 73 on the Israeli side, most of them soldiers.