No one is standing in the way of the Palestinians declaring a state. They can negotiate with Israel by being or not being a soveriegn entity, but I think it's to their advantage to declare a state and negotiate. It adds credibility, and world recognition at a minimum. Even Israel will have to recognize it as Israel said it would.
Dozens protest in Shfaram against budget cuts targeting Christian schools (Haaretz)
from the article: Hamas denies Meshal said group would consider recognizing Israel