"It causes unacceptable suffering," he said, adding that he was saddened to see that teenagers and children were the worst affected.
"This policy is also counterproductive. It prevents legitimate commerce and encourages smuggling. It undercuts moderates and empowers extremists."
It was the UN chief's second visit to Gaza since the war in which some 1,400 Palestinians were killed and thousands of houses were severely damaged or destroyed by Israeli forces. Thirteen Israelis were killed in the fighting.
Ban toured some of the hardest-hit areas of Gaza before announcing projects to build 150 homes, a flour mill and a sewage treatment plant, for which Israel has given rare approval for the import of construction materials.
The housing project on the site of a former Israeli settlement near the southern town of Khan Yunis is seen as a way of proving to Israel that the United Nations can bring building materials into the territory without them being hijacked by Hamas or other militant groups.
Munir Manneh, the head of construction projects for the UN refugee agency UNRWA, said all the materials would be carefully documented.
"We will give an excellent example and prove that we will control the process 100 percent," he said after presenting the project details to Ban.
The UN chief hailed the projects, but said the sight of houses still in ruins more than a year after the war was "quite distressing," and that more reconstruction was needed, calling the projects a "drop in the bucket."
The Israeli offensive in Gaza largely succeeded in its aim to halt years of near-daily rocket attacks from the territory that were rarely lethal but left residents living near the border in a constant state of fear.
Israel has said the border closures, which keep out all but vital aid, are necessary to prevent Hamas from rebuilding its military infrastructure and to pressure it to release Israeli soldier Gilad Shalit, who was captured in 2006.
Ban condemned all forms of violence during his visit, but also told Israel's President Shimon Peres that the closures had imposed "unacceptable hardships."
"I understand and share Israel's concerns about the challenges posed by Hamas, but Israel's blockade continues to impose unacceptable hardships while empowering extremists," he said.
"I am confident the blockade can be lifted while addressing Israel's legitimate security concerns."
Gaza's borders had been mostly quiet since the end of the war, but in the past three days several rockets have slammed into Israel, with one killing a Thai labourer -- the first casualty of rocket attacks since the fighting was ended by unilateral ceasefires.
Another exploded late on Sunday near homes in the Zikim kibbutz just north of Gaza, but it hit open ground and caused neither casualties nor damage, an army spokesman said.
Ban's visit was part of a two-day regional tour in which he encouraged Israeli and Palestinian leaders to revive the peace process.
Earlier this month the Palestinians grudgingly agreed to indirect talks with Israel after months of US shuttle diplomacy, but progress stalled two days later when Israel announced plans for 1,600 settler homes in east Jerusalem.
The Palestinians have refused to hold direct negotiations unless Israel halts settlement construction in the occupied West Bank and east Jerusalem, which they view as the capital of their future state.
Ban's visit came on the heels of a statement by the Middle East diplomatic Quartet -- the United States, United Nations, European Union and Russia -- calling for a return to talks and a final peace deal within two years.
He concluded his visit on Sunday by meeting Israeli Prime Minister Benjamin Netanyahu.
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