Palestinian President Mahmoud Abbas has asked Hamas to form a new Palestinian cabinet and pursue his agenda for negotiations with Israel.
Mr Abbas, whose long-dominant Fatah faction was crushed by Hamas in a January 25th parliamentary election, gave Hamas leader Ismail Haniyeh a formal letter authorising him to form a government.
Mr Haniyeh (43), considered by many to be a pragmatist, moved to defuse a potential crisis over policy on Israel, saying he would study the letter before responding to its calls to honour past peace deals with the Jewish state.
But Hamas showed no sign of backing down from the calls of its charter to destroy Israel.
Mr Haniyeh said he would not seek to disperse Hamas's armed wing and have its gunmen join the Palestinian security services. "It is too early to talk about this because there is continued occupation and aggression against the Palestinian people", he said.
In Tehran, Hamas's political leader Khaled Meshaal said "talking to Israel is a waste of time as long as there is no talk about withdrawing from Palestine". "Resistance will continue as long as the occupation and aggression continues," Mr Meshaal said at Tehran University. "There is no recognition of Israel, no matter what the cost is."
Responding to these statements, Israeli interim Prime Minister Ehud Olmert said in a televised interview: "We will fight against Hamas will the strength that is necessary ... we will build a wall against Hamas, and we know how to do it."
But Israel had not lost its hopes for peace, Mr Olmert said, despite the Jewish state's vow to boycott Hamas until it renounces violence and recognises Israel's right to exist.
"Despite the slimmer chance, hope has not ceased," Mr Olmert told Israel's Channel 1 television. "I am responsible for ... the struggle against Hamas and also protecting the hope and chance of reaching an agreement."
Hamas has carried out nearly 60 suicide bombings in Israel since a Palestinian uprising began in 2000 but has largely abided by a ceasefire forged a year ago.