HRW said on Friday that its Israel and Palestine Director Omar Shakir, a US citizen, had received a rejection letter on February 20, months after an application for the permit was submitted by the group on his behalf.
The Israeli foreign ministry said that the organisation was "not a real human rights group", with a foreign ministry spokesman calling it "fundamentally biased" with a "hostile agenda".
New York-based HRW, which operates in 90 countries, said it has documented violations considered illegal under international humanitarian law by all sides in the conflict, including the Palestinian Authority, and Hamas, the Palestinian group that governs the Gaza Strip.
The Israeli interior ministry cited a recommendation received by the foreign ministry, which said that HRW's "public activities and reports have engaged in politics in the service of Palestinian propaganda, while falsely raising the banner of 'human rights'".
In a statement, HRW said the decision came as authorities sought "to limit the space for local and international human rights groups to operate in Israel and the Occupied Palestinian Territories".
Emmanuel Nahshon, an Israeli foreign ministry spokesman, told the AFP news agency that the group was not banned, and any Israeli and Palestinian employees would still be allowed to operate in Israel, but said: "Why should we give working visas to people whose only purpose is to besmirch us and to attack us?"
Speaking to local media, Nahshon said Israel was "fed up with them [HRW] coming here every time and taking advantage of their stay here. They don't do anything but look for an anti-Israel agenda."
Iain Levine, HRW's deputy executive director of programme, said: "This decision and the spurious rationale should worry anyone concerned about Israel’s commitment to basic democratic values."
"It is disappointing that the Israeli government seems unable or unwilling to distinguish between justified criticisms of its actions and hostile political propaganda."
In response to the decision to refuse his visa, Shakir said: "We are genuinely shocked. We work in over 90 countries across the world. Many governments don't like our well-researched findings but their response is not to stifle the messenger."
According to Shakir, Israeli authorities said they would also refuse visas to other non-Israeli or Palestininan HRW staff.
Last year, HRW issued a report, "Occupation Inc.", in which it accused foreign and Israeli firms operating in illegal Israeli settlements in the occupied West Bank of contributing to human rights abuses.
In July 2016, Israel's parliament, the Knesset, passed a law targeting human rights groups and NGOs that receive foreign funding. The law, applicable to about 25 organisations, compels them to declare funds in official reports, and according to HRW, imposes "onerous reporting requirements that burden their advocacy".
It is not the first time the organisation has faced criticism and resistance from governments.
"We have little relations with governments in North Korea, Sudan, Uzbekistan, Cuba and Venezuela where there is zero appetite for human rights engagement," Shakir said. "With this decision, Israel is joining the list."