Javier Solana, the EU foreign policy chief, has said tens of millions of dollars of aid to the Palestinian Authority could be halted if the Islamist group wins elections next month and fails to renounce violence.
Hamas has swept municipal elections in several West Bank cities last week, reflecting Palestinian dissatisfaction with the ruling Fatah party.
The strong showing has raised the possibility that Hamas could win the Palestinian parliamentary elections on 25 January.
"All the political parties have the right to be part of the elections, but there is a certain code of conduct that has to be accepted by everybody," Solana told reporters during a visit to Tel Aviv. "It's very difficult that parties who do not condemn violence ... can be partners for the future."
Solana said that an administration including a party which failed to clearly reject violence and recognise Israel's right to exist could not continue to receive EU funding.
EU aid planned for next year is said to be $312 million.
"It would be very difficult for the help and the money that goes to the Palestinian Authority to continue to flow," Solana said. "The taxpayers in the European Union, members of the parliament of the European Union, will not be in a position to sustain that type of political activity."
The US House of Representatives passed a resolution on Friday stating that American support for the Palestinian Authority would be placed at risk by any Hamas participation in government.
Israeli officials have insisted that Mahmoud Abbas, the Palestinian president, should bar Hamas from the parliamentary election, saying that a victory by the group will scupper peace prospects.
The Palestinians rely on the international community for roughly half of their annual operating budget.
The international community has, however, been urged by Palestinian groups, including Fatah, to stay out of internal Palestinian affairs and have backed Hamas's right to contest the elections.