Presidential spokesman Nabil Abu Rudeina said Wednesday that an agreement between Fatah and Hamas “is an internal affair that has nothing to do with Israel, which is not a party to it.”

"The agreement strengthens Palestinian unity and its just struggle to establish an independent state with Jerusalem as its capital," he said in response to remarks by the Israeli prime minister in Jerusalem.

Benjamin Netanyahu had demanded that President Abbas "choose between peace with Israel or peace with Hamas," saying such an agreement paved the way for Hamas to take control of the West Bank too.

"The Palestinian Authority must choose between peace with Israel or peace with Hamas. There cannot be peace with both because Hamas strives to destroy the state of Israel and says so openly," Netanyahu said.

"The very idea of reconciliation shows the weakness of the Palestinian Authority and creates the prospect that Hamas could retake control of Judea and Samaria just like it took control of the Gaza Strip," he said.

Abu Rudeina responded by saying Netanyahu "must choose between peace and settlements."

The spokesman also noted that "the Palestine Liberation Organization, as the sole legitimate representative of the Palestinian people, is committed to the peace process and its terms of reference."

The agreement in Cairo "strengthens this choice and the national position because it puts an end to the Israeli claim that the PLO does not represent the Palestinian people, due to the division.”

If anyone has to make a choice, he continued, it is “Netanyahu who must choose between a just and comprehensive peace with the Palestinian people and its representatives -- or the settlements.”

The United States, meanwhile, said it supported Palestinian reconciliation on terms "which promote the cause of peace." Hamas, however, "is a terrorist organization,” said spokesman Tommy Vietor.

“To play a constructive role in achieving peace, any Palestinian government must accept the Quartet principles and renounce violence, abide by past agreements, and recognize Israel’s right to exist,” he said.

Wednesday's deal was brokered in Cairo where the factions met with Egypt's new spy chief Murad Muwafi, whose predecessor Omar Suleiman tried unsuccessfully to bridge the split.

Cairo has long tried to broker a deal bring the two warring factions, and in October 2009 brokered a deal which would have led to a transitional government followed by elections.

Fatah signed the deal, but Hamas stalled and the agreement was never implemented.

Tensions between the two movements date back to the start of limited Palestinian self-rule in the early-1990s when Fatah strongmen cracked down on Islamist activists.

They worsened in January 2006, when in a surprise general election rout, Hamas beat the previously dominant Fatah to grab more than half the seats in parliament.

Hamas expelled Fatah from Gaza after a week of deadly clashes in June 2007, cleaving the occupied Palestinian territories into rival hostile camps.

Since then, Gaza has been effectively cut off from the West Bank, which is under the control of Fatah, and repeated attempts at reconciliation have led nowhere.

The disunity of the Palestinians has prevented them from taking a common stance in peace talks with Israel, which are now off the table.