Background: The construction industry is the most active tool for societies development and one of the main pillars in the Palestinian economy. Objective: The aim of this study is to identify the main internal and external challenges that small-sized construction firms are wrestling in the Gaza Strip. In addition to that, to review briefly small-sized construction firms’ characteristics, stages of survival and growth and importance to the economy. Methods: At first, all the relevant literature was systematically reviewed. A survey was conducted through a questionnaire to collect the data from 68 contractors. A Likert scale data were analyzed to rank the success factors and the barriers using Relative Importance Index (RII). Results: The most affecting small-sized construction firms’ challenges are: start-up cost, foreign currency fluctuation, access to finance during the execution of work, continuous abruption and unstable prices of construction material, nomination and recruitment policies for the team, the lack of clarity of vision and the difficulty of developing a strategic plan far away, the complexities of dealing with suppliers, and the general economic situation. Conclusion: Based on the above challenges, small-sized construction firms should have a protection against unequal competition and a mitigation of financial loads. In addition to a group motivational measures to improve the opportunities for the small contractors to survive and grow.