"The government of Israel will not carry out political negotiations with a Palestinian government that relies on Hamas, a terror organisation which calls for the destruction of Israel, until it fulfils the following conditions", the statement said.
Responding to the conditions set by the Israeli government on Palestinian reconciliation, presidential spokesman Nabil Abu Rudeineh said on Tuesday that national reconciliation is a top Palestinian interest and that the position of President Mahmoud Abbas is to move forward with reconciliation in order to realize the hopes and aspirations of the Palestinian people for unity and independence.
The Israeli-Palestinian peace process has been stalled since April 2014 due to Israel's continued settlement activities on the occupied Palestinian territories.
An unnamed Palestinian official also told the Ynet news site the cabinet decision was a "new excuse" by Israel to avoid peace talks. Israeli leaders also urge branch authorities to reinforce persecution of Hamas's "terrorist structures" in West Bank.
Abbas seeks an independent state in the West Bank, East Jerusalem and Gaza.
Hamas seized control of the Gaza Strip from Abbas' forces in 2007, leaving the Palestinians divided between two governments.
The agreement, brokered by Egypt, was inked Thursday in Cairo, though many clauses have yet to be worked out.
Netanyahu's stance matched past demands placed on Hamas by Israel and the global community, that it renounce violence and recognize Israel's right to exist.
Yet a spokesperson for Israeli prime minister Binyamin Netanyahu said Israel would not recognise the agreement "as long as Hamas does not disarm".
Hamas is considered a terrorist organisation by the United States and the European Union, but diplomats say it would be possible to form a unity government that they could deal with that does not officially include the Islamist movement.
The statement said negotiations would not be held until a range of conditions were met - and it seemed unlikely that all demands could be reached.
Jewish Home party head Naftali Bennett, a senior government minister, welcomed the cabinet decision, saying in a statement Israel would not engage in peace talks with Abbas over his "association with a terrorist organization".
The security cabinet decision stopped short of what one of its members - Education Minister Naftali Bennett -had publicly demanded in recent days: severing connection with the PA as a result of the pact that he said turned the PA into a "terrorist authority".
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