Ottawa says the money will help advance the peace process, promote security and deliver humanitarian assistance.
Canada was contributing $300 million over five years, or $60 million a year, in a program that expired in June.
Since the signing of the Oslo peace accords in 1993 and the creation of the Palestinian Authority, Canada has provided more than $650 million in development assistance for the West Bank and Gaza.
Harper is making his first visit as prime minister to the Middle East and is being received as a "best friend" to Israel. Later Monday, he was scheduled to address the Israeli parliament, the Knesset.
He started the day with a visit to the Church of the Nativity in Bethlehem. He and his wife, Laureen, were given a warm welcome to Israel at Prime Minister Benjamin Netanyahu's office.
"He is receiving a very warm welcome here, but not so warm …in the West Bank," CBC's Sasa Petricic reported.
"It was very official. It was very proper …. But there is not a lot of warmth on the other side."