The White House on Wednesday urged Palestinians to ensure that a reconciliation deal between rival factions is implemented in a way that advances the prospect for peace with Israel rather than undermining it.

"It's important now that Palestinians ensure implementation of that agreement in a way that advances the prospects of peace rather than undermines them," State Department spokesman Mark Toner said, after the secular Fatah and Islamist Hamas groups signed an agreement to formally end a 4-year rift.

"We'll wait and see what this looks like in real and practical terms... We still don't know what, if any changes, there will be at the governmental level," he said.

The State Department also said the United States continued to believe that Hamas must recognize Israel's right to exist, reject violence and abide by interim peace agreements if it wants to play a meaningful role in the political process.

Toner said the United States continued to believe that Hamas must recognize Israel's right to exist, reject violence and abide by interim peace agreements if it wants to play a meaningful role in the political process.

He said the United States would look at the formation of any new Palestinian government before taking steps on future aid.

Prime Minister Benjamin Netanyahu denounced the reconciliation deal as a "mortal blow to peace and a great victory for terrorism", and said he would not negotiate with a "Palestinian version of al-Qaida".

Hamas leader Khaled Meshaal, meanwhile, challenged Israel to peace, offering to work with Palestinian President Mahmoud Abbas and Egypt on a new strategy to solve the Arab-Israeli conflict.

But Meshaal, addressing a meeting in Cairo to announce a reconciliation agreement between his Islamist group and its secular Fatah rival, said he did not believe Israel was ready for peace with any Palestinians.

"We have given peace since Madrid till now 20 years, and I say we are ready to agree among us Palestinians and with Arab support to give an additional chance," Meshaal said, referring to the 1991 international Middle East peace conference that launched Israeli-Arab peace talks.

"But, dear brothers, because Israel does not respect us, and because Israel has rejected all our initiatives and because Israel deliberately rejects Palestinian rights, rejects Fatah members as well as Hamas...it wants the land, security and claims to want peace," he said.

Israel regards Hamas, whose founding charter calls for its destruction of the Jewish state, as a terrorist organization. Hamas has opposed Abbas' peace efforts with Israel.

Meshaal said that Egypt, the Arab League and the Muslim World's largest body, the Islamic Organization Conference, must work together to search for a new strategy.

"We don't want to declare war on any one," Meshaal said.

"We want to wrench our rights and draft a new strategy for ourselves, to master all forms of power that will force Netanyahu to withdraw from our lands and to recognize our rights," he added.

"We are telling the world: stand with us."