Palestinian President Mahmoud Abbas said on Saturday any unity government with Hamas would have to agree to a two-state solution with Israel, a demand quickly rejected by his Islamist rivals.
The disagreement could hamper Egyptian-brokered reconciliation talks aimed at ending a schism between the Hamas-ruled Gaza Strip and the occupied West Bank, where Abbas' Fatah faction holds sway.
"We are moving in steady steps towards...a national unity government that abides by our known commitments, which include the two-state vision and the signed (peace) commitments," Abbas said in the West Bank city of Ramallah.
Hamas official Ayman Taha in Gaza said Abbas's comments undermine chances for reaching a unity agreement.
"We reject any pre-conditions in the formation of the unity government. Hamas will never accept a unity government that recognizes Israel," Taha said.
A dozen Palestinian factions including Fatah and Hamas began reconciliation talks in Cairo on Thursday to try to agree by March 20 on a unity government. Previous efforts by Arab negotiators to reconcile Fatah and Hamas have failed.
A deal could lead to the lifting of Israel's blockade of the Gaza strip and boost Abbas's peacemaking efforts with Israel.
The United States, Israel and the European Union shun dialogue with Hamas, citing its refusal to renounce violence, to recognize Israel and accept past peace agreements.
Abbas launched formal peace talks with Israel in 2007, though the negotiations have lead to little progress.
Hamas leaders have offered a long-term truce with Israel in return for a viable Palestinian state in the West Bank and the Gaza Strip. The Islamist group continues to say it will not formally recognize Israel and its 1988 founding charter calls for the destruction of the Jewish state.
Also Saturday, Hamas rejected U.S. Secretary of State Hillary Clinton's remarks that a successful Palestinian reconciliation process must include recognition of Israel by Hamas.
"Hamas will not recognize Israel or the Quartet's conditions, and Clinton's statement is not acceptable to the Palestinian people," said Hamas spokesman Ismail Radwan.
Clinton said Friday that a successful Palestinian reconciliation process between Fatah and Hamas must include recognition of Israel by Hamas.
Speaking ahead of her first visit to the Middle East as Secretary of State, Clinton told the Voice of America that "I believe that it's important, if there is some reconciliation and a move toward unified authority, that it's very clear that Hamas knows the conditions that have been set forth by the Quartet, by the Arab [League] summit."
She said that Hamas must "renounce violence, recognize Israel and abide by previous commitments. Otherwise, I don't think it will result in the kind of positive step forward either for the Palestinian people, or as a vehicle for a reinvigorated effort to obtain peace that leads to a Palestinian state."
The former first lady and former U.S. senator from New York is kicking off her second overseas trip as the nation's top diplomat by attending an international conference in Egypt where she will announce on Monday a U.S. government pledge of up to $900 million in humanitarian assistance for the rebuilding of the war-shaken Gaza Strip.
The Palestinians are seeking $2.8 billion for Gaza. A key complication is that the United States does not recognize the Hamas movement that rules Gaza and will not allow aid money to flow through Hamas.
The pledge conference for Gaza reflects in part a U.S. effort to move quickly to influence events there, where the Islamic militants of Hamas are aligned with Iran and opposed to peace talks with Israel. Hamas is at odds with the other key Palestinian faction, Fatah, which takes a more moderate approach to Israel.
Clinton also will visit Israel to underscore President Barack Obama's commitment to finding a "two-state solution" to the Israeli-Palestinian conflict that establishes a sovereign Palestinian state at peace with Israel.
After its elections February 10, Israel is operating under a caretaker government. The hawkish Benjamin Netanyahu is attempting to form a coalition government but the timing and outcome are in doubt.
Among leaders Clinton would be expected to visit in Israel are Netanyahu and Foreign Minister Tzipi Livni, leader of the centrist Kadima Party, which won one more seat in the election than Netanyahu's Likud. Netanyahu, who opposes moving forward in peace talks with the Palestinians, was asked to put together the next government because he has the support of a majority of the elected lawmakers.
Clinton also will venture into the West Bank to meet with leaders of the Palestinian Authority, including Prime Minister Salam Fayyad and President Mahmoud Abbas.