JERUSALEM, Nov 30 (Reuters) - Israel decided on Wednesday to release tax money it had been withholding from the Palestinians since they won membership to the U.N. cultural agency UNESCO a month ago, a government official said.

Prime Minister Benjamin Netanyahu's inner cabinet, facing international pressure, voted to unfreeze the funds, amounting to about $100 million a month, that Israel collects on behalf of the Palestinian Authority, the official said.

The cash, which includes duties on goods imported to the Palestinian territories, is vital for paying civil servants' salaries.

In a punitive measure, Israel froze the transfers on Nov. 1, a day after the Palestinians won UNESCO membership over Israeli and U.S. objections as part of their drive for statehood at the United Nations in the absence of peace talks.

Palestinian Prime Minister Salam Fayyad has said the Palestinian Authority would not be able to pay the salaries of about 150,000 workers this month if Israel did not release the money.

The Israeli government official said the inner cabinet decided that tax revenues for October and November would be handed over to the Palestinian Authority.

Israeli-Palestinian peace negotiations stalled shortly after talks were renewed in September 2010 in a dispute over Israeli settlement building in the West Bank and East Jerusalem. (Reporting by Ari Rabinovitch, Editing by Jeffrey Heller)