AIN EL-HILWEH REFUGEE CAMP—Inside Lebanon's largest Palestinian refugee camp, disaffected and unemployed youth are increasingly joining radical Islamist groups fighting in Syria, saying it gives their lives a sense of purpose.

The growing hold of the jihadists is evident on the street at the camp's entrance, lined with flags of al Qaeda-linked groups that operate in Lebanon or Syria. Homes on Tawareq Street are pockmarked by bullets and rocket-propelled grenades—scars of recent fighting between Islamist militants and the Lebanese army.

The camp's ties to jihadist groups fighting in Syria came into sharp relief on Tuesday. The head of the group that claimed responsibility for the bombing that killed 25 people outside Iran's Embassy in Beirut lived in the camp for a time and the brigade operated openly there. The group linked the bombing to the conflict in Syria.

The youth of Ain el-Hilweh, Lebanon's most radicalized camp, have largely given up hope of a Palestinian state that they can return to someday. With unemployment at about 80% here, some say they are drawn to fight with Islamists trying to topple the Syrian regime.

With the West Bank-based Palestinian Authority weakened by corruption and mismanagement, a leadership vacuum in the camp is increasingly being filled by the Islamist militants.

Munir el Makdah, camp leader of the Fatah faction that represents the Palestinian Authority, said he is powerless to stop the better-funded extremist groups from luring youth here. Even his own 18-year-old son Hussein tried to sneak across the border to fight in Syria with four friends in August.

But they were caught by Hezbollah, the powerful Lebanese Shiite militant group that is allied with the Syrian regime and handed them over to the Lebanese army.

"In my day, it was about resisting Israel, none of this religious fight," said Mr. el Makdah. "Fatah has lost the majority of control over the camps because we can't provide anymore," he added.

"The new generation have to occupy themselves with something and they're going either into drugs or Islamic radicalism.…The Islamic groups are much more organized and have much more money."

Posters of fighters sporting handlebar mustaches, shaggy haircuts and aviator sunglasses, popular with mostly secular militants during Lebanon's civil war, have been replaced with images of men with long beards and white robes with Islamic texts in the backdrop.

They stand as a testament to the growing radicalization throughout the region, which the Syrian civil war has fueled.

"We are putting up the flags of al Qaeda ourselves," said Ahmed Abdullah, 18, who dropped out of school when he was nine and is jobless like the vast majority of Ain el-Hilweh's residents.

Mr. Abdullah sat in a carpentry shop on Tawareq Street with two friends who had both fought in Syria with Islamist groups. He said he wants to fight in Syria, but hasn't yet, worried that Lebanese forces or the Syrian regime will capture him crossing the border.

"I went with my brother," said Mahmoud, 21, a handyman. "We fought with Jabhat al Nusra," he said, referring to one of the strongest Islamist groups fighting in Syria.

"But there were so many of us and not enough weapons," he added. "All of us want to get to Syria to fight. They are Muslims there like us."

The ties between the Syrian war, Lebanon and the Palestinian camps came into clearer focus in the Iranian Embassy bombing.

The al Qaeda-linked Abdullah Azzam Brigades claimed responsibility, demanding the withdrawal of Hezbollah and Shiite fighters from Syria.

The leader of the group, Saudi national Majed Bin-Mohammed al-Majed, lived in Ain el-Hilweh for a time, though Lebanese authorities believe he may be fighting in Syria now. He is on Saudi Arabia's most-wanted terrorist list for his alleged ties to al Qaeda.

The poverty and lawlessness in Lebanon's 12 Palestinian camps with some 450,000 refugees are providing extremists with the cover they need to bolster their ranks and recruit for Syria's war, a magnet for the region's jihadists.

Under a decades-old agreement, the Lebanese army is barred from patrolling the camps, making them prime spots for militants to shelter, Lebanese officials lament.

Flush with donations from citizens in the oil-rich Gulf, Lebanese officials say extremist groups here are aggressively bolstering their ranks by seizing on the Palestinian Authority's governance failures and a frustrated refugee population.

Many Middle Eastern countries haven't granted citizenship to their Palestinian refugee populations, but most give those populations more rights than Lebanon, which bars Palestinian refugees from most employment.

"There is no future in the camps. We have God and UNRWA (the United Nations Relief and Work Agency), and look at what they've done," Ahmed Moussa said spitefully, referring to the U.N. agency that aids Palestinian refugees.

Mr. Moussa said several friends and relatives had fought in Syria.

"From every street, there are five or six men who've fought."

Ain el-Hilweh was supposed to be a temporary settlement for some of the 700,000 Palestinians that fled or were forced out of their homes during the 1948 war surrounding the establishment of the state of Israel.

Instead the camp, whose name means 'sweet spring,' has become a reluctant home, tents giving way to houses stacked on top of each other over the decades.

The camp—Lebanon's largest—now houses some 80,000 refugees in an area not even a mile wide. It abuts the southern city of Sidon, Lebanon's third largest, which also suffers from poverty.

Tawareq, which means 'emergency' in Arabic, hosts militant groups such as Jund al Sham—one of the most powerful Islamist group in the camp and biggest recruiter of jihadists fighting in Syria. The street is absent of men during the day. Women say their husbands and sons won't venture out in the daytime, worried about snipers or assassination by their secular rivals in the Palestinian Authority.

Tensions between Fatah's mostly secular fighters and the mushrooming Islamist militants in the camp boiled over late last month in a spate of assassinations. Fatah fighters are trying to curb the influence of militants such as Jund al Sham, officials say.

In October, Fatah's Mussad Hujeir, in charge of camp security, was gunned down a few days after an assassination attempt on a Jund al Sham leader. A Western official said assassinations have accelerated, though many aren't disclosed publicly.

Palestinian leaders such as Mr. el Makdah worry that the rise of Islamist militants will bring a crushing response from the Lebanese state. Fresh on their minds is the battle between Fatah al Islam—another al Qaeda spinoff group—and the Lebanese security forces in 2007. Fatah al Islam attacked the army from Nahr al Bared Palestinian camp, just outside the northern city of Tripoli.

The three-month siege killed 168 soldiers, 52 civilians and 226 militants. The army had to raze the camp to defeat Fatah al Islam, making the Palestinians there refugees once again.

Corrections & Amplifications:

Many Middle Eastern countries haven't granted citizenship to their Palestinian refugee populations, but most give those populations more rights than Lebanon, which bars Palestinian refugees from most employment. An earlier version of this article incorrectly said Lebanon is one of the few countries in the region that hasn't given its Palestinian refugees citizenship.