The broadcaster said in a statement that it had informed the Disasters Emergency Committee (DEC), an umbrella organisation for 13 humanitarian aid agencies, of its decision.
John Ryley, head of Sky News, said: "The conflict in Gaza forms part of one of the most challenging and contentious stories for any news organisation to cover.
"Our commitment as journalists is to cover all sides of that story with uncompromising objectivity."
The decision comes after BBC Director-General Mark Thompson today defended the corporation's decision not to broadcast the appeal in spite of more than 10,000 complaints.
He said the BBC was "passionate" about defending its impartiality.
Speaking on Sky News, the channel's head of foreign news, Adrian Wells, said: "Passions are raised on this story, passions are raised in this country and that is only a small reflection of the passions raised in the Middle East. And that is part of the backdrop of why we've made the decision we've made.
"We have to, as an international channel, focus on our primary role and that is to report the story and not become the story."
Asked why Sky had decided not to broadcast the appeal but Channel 5, for whom they provide news coverage, will show it, he said: "The dynamics for Sky News are different. Channel 4, 5 are not international news channels - they are broad channels showing all sorts of programmes. The dynamics about what is right for us are different to what is right for them.
"Let me say to those people who might be angry, people who might be passionate about this, there is no question about Sky's commitment to reporting the region. We've had our reporters there since the gates of Gaza opened. There is absolutely no question of Sky viewers not being aware of the humanitarian crisis."
He said that Sky had "no problem with the good intentions of the DEC appeal".
Mr Ryley continued in his statement: "We have provided, and we will continue to provide, extensive coverage from Gaza and from the wider region on the conflict and its human consequences for people on both sides.
"Our team is on the ground in the region and will continue to cover the story in the coming days and weeks.
"The absolute impartiality of our output is fundamental to Sky News and its journalism.
"That is why, after very careful consideration, we have concluded that broadcasting an appeal for Gaza at this time is incompatible with our role in providing balanced and objective reporting of this continuing situation to our audiences in the UK and around the world.
"It is important to state that this decision is not a judgment on the good intentions of the appeal.
"No-one could fail to be touched by the human suffering on both sides of the conflict, which has been the focus of much of our own reporting in the region."
The decision by Sky comes after the BBC came under intense pressure over its decision not to broadcast the appeal.
More than 10,000 complaints have been received about the BBC decision and it has been urged by a series of public figures including the Archbishops of Canterbury and York to reconsider its decision.
A parliamentary motion also urging the BBC to screen the appeal was backed by more than 50 MPs from across the Commons.
Terrestrial broadcasters ITV, Channel 4 and Five said they would show the advert from today.
Over the weekend, thousands of people demonstrated against the decision outside the BBC's Broadcasting House in central London and, last night, about 50 protesters "occupied" the lobby of BBC Scotland's headquarters in Glasgow.
The DEC - which brings together several major aid charities including the British Red Cross, Save the Children and Oxfam - wants the appeal to be broadcast on TV and radio to help raise millions of pounds for people in need of food, medicines and shelter following Israel's three-week assault on the Palestinian territory.
Secretary of State for International Development Douglas Alexander told Sky News that the BBC was, "a treasured national institution" and that their coverage of the conflict, in common with Sky's, had been "exemplary".
But he said: "My appeal is a much more straight forward one. People are suffering right now, many hundreds of thousands of people are without the basic necessities of life. That for me is a very straight forward case and I sincerely hope that the British people respond with characteristic generosity.
He said that the government is today sending armoured cars to Gaza to help the UN deliver aid and was donating money to the mine clearance effort.
"We are matching our words of concern with practical actions. We are getting on with the job this week to distribute money on behalf of the British people to British organisations."
Defending the BBC decision, Mr Thompson said potentially many millions of people would find out about the appeal through BBC news programmes.
Asked how he could justify refusing a request made on behalf of major charities such as the Red Cross, Save the Children and Christian Aid, Mr Thompson told BBC Breakfast: "When they first contacted us they absolutely acknowledged that the particular nature of what was going on in Gaza might well cause a problem for the BBC's impartiality.
"Right from the start, the DEC knew because this is not a new policy, the idea that the BBC would take really quite a strict view about impartiality, especially in a story as complex and contentious as Gaza and the broader Israel/Palestine story, that is not news and wasn't a surprise to the DEC either."
He added that if the situation was the "other way round" and the principal humanitarian concern was in Israel and not Gaza, the view of the corporation would be "exactly the same".
He said the BBC understood the "absolutely good intentions" behind the appeal.
Other public figures to criticise the BBC decision include Samantha Morton, the Golden Glob- winning actress, who said she would never work for the BBC again if it failed to change its decision.
The advert was not a political message but "about raising money for children who are dying", she said.
The early day motion to be tabled by Labour's Richard Burden has received the support of 51 MPs from across the Commons.
Mr Burden, a member of the Commons' International Development Committee, said he had written to Mr Thompson to press for an explanation for the BBC's decision, calling those given so far "both unconvincing and incoherent".
"This is not about taking sides in the conflict. It is about providing urgent help to people in desperate need," he said.
"More than 400 children have died, thousands are homeless and nothing short of a humanitarian catastrophe is unfolding in Gaza.
"The important thing is to get aid into Gaza. This is recognised by almost everyone - including the Government. The BBC appears to be the only one who has a problem seeing this."
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