Mahmoud Zahar, a senior Hamas leader who participated in the reconciliation talks between Fatah and Hamas, said on Wednesday that the interim Palestinian government would not be able to work on peace negotiations with Israel.

The rival Palestinian movements Fatah and Hamas came to a historic agreement on Wednesday, when they announced a decision to reconcile and form an interim government ahead of elections, after a four-year feud. Both sides hailed the agreement as a chance to start a fresh page in their national history.

Zahar said Wednesday's deal covered five points, including combining security forces and forming a government made up of "nationalist figures".

"Our program does not include negotiations with Israel or recognizing it," Zahhar said in Cairo. "It will not be possible for the interim national government to participate or bet on or work on the peace process with Israel."

Israel has said that the accord, which was brokered in secrecy by Egypt, would not secure peace in the Middle East and urged Abbas to carry on shunning the Islamist movement, which has governed the Gaza Strip since 2007 after ousting Fatah in a civil war.

Forging Palestinian unity is regarded as crucial to reviving any prospect for an independent Palestinian state, but Western powers have always refused to deal with Hamas because of its refusal to recognize Israel and renounce violence.

"We have agreed to form a government composed of independent figures that would start preparing for presidential and parliamentary elections," said Azzam al-Ahmad, the head of Fatah's negotiating team in Cairo.

"Elections would be held in about eight months from now," he said, adding the Arab League would oversee the implementation of the agreement.

In the West Bank city of Ramallah, Palestinian President Mahmoud Abbas' spokesman Nabil Abu Rdainah said the reconciliation was not Israel's concern.

"Netanyahu must choose between a just peace with the united Palestinian people ... and settlements," Abu Rdaineh said.

At news conference in Cairo, where the Fatah and Hamas leaders sat side by side, Ahmad said Palestinians had paid a heavy price for their infighting.

"We are proud that we now possess the national will to end our divisions so we can end the occupation of Palestine ... the last occupation in history."

Hamas won the last Palestinian legislative elections held in 2006 and a new ballot is months overdue. Israel is worried such a vote could hand Hamas control of the West Bank, which is run by Abbas and his more secular supporters.

"The Palestinian Authority must choose either peace with Israel or peace with Hamas. There is no possibility for peace with both," Netanyahu said in a televised statement.

The White House said Hamas was "a terrorist organization" and added that any Palestinian government would have to renounce violence. A U.S. official said it would also have to respect past peace deals and recognize Israel's right to exist.

Both Hamas and Fatah, however, dismissed Netanyahu's ultimatum. "Abu Mazen (Abbas) has said we want Hamas, Hamas is part of the Palestinian national fabric," Fatah's Ahmad said.

Hamas spokesman Taher al-Noono also said Israel was "not concerned with Palestinian reconciliation and has been an impediment to it in the past".

The surprise accord came against the backdrop of tumult across the Middle East and followed the ousting in February of Egypt's President Hosni Mubarak, who was a close ally of the United States and had no patience for Hamas.

"This agreement is possible because the Egyptian regime has changed. The new administration is taking a balanced position," said Hany al-Masri, a political commentator who took part in talks over the past two weeks that led to the breakthrough.

Implementation of the accord is due to start following an official signing ceremony in Cairo, expected in early May.

Abbas is dependent on Western aid, which he has used to build up state institutions ahead of hoped-for independence.

Peace talks between Israel and the Palestine Liberation Organization broke down last year and Abbas has been pushing instead to obtain United Nations backing this September for an independent state on all areas Israel occupied in a 1967 war.

Netanyahu has criticized such a move and is expected to address a joint meeting of the U.S. Congress during a visit to Washington next month where he plans to outline a plan to re-start the frozen negotiations.

While Fatah has supported the notion of a negotiated peace deal with Israel, Hamas has firmly rejected it and regularly fires missiles and mortars from Gaza into Israel.