Khaled Meshaal was speaking at a rally in al-Yarmuk quarter in Damascus on Friday to mark 38 years since the creation of the Popular Front for the Liberation of Palestine.
"We will not enter a new truce while our people are surrounded and are preparing for a new round of conflict," he said. "We have had enough of the truce while our prisoners are still held."
The Palestinian Authority on Saturday criticised Meshaal's announcement.
Meshaal's comments "are irresponsible and are contrary to the national consensus", the Palestinian Authority said in a statement.
It said the decision was aimed at "sabotaging the elections" planned for 25 January in which the Islamist group is expected to make inroads against the ruling Fatah group.
Meshaal's announcement came amid further violence in the Gaza Strip and West Bank, as Israel carried out lethal raids after Monday's suicide bombing in the northern Israeli city of Netanya in which five people died.
"There's no question of agreeing a new truce and there's no
A Palestinian faction leader was
killed on Wendesday in an air strike
point in negotiating, because the policy of procrastinating over applying agreements pushes us not to renew the truce," Meshaal said.
Palestinian groups agreed to the truce at a meeting in Cairo in March, but it has been far from convincing since then, with fighters retaliating for targeted assassinations of their leaders carried out by the Israeli military.
Addressing the gathering, which was attended by representatives of other Palestinian groups including Islamic Jihad, Meshaal said: "The Palestinian gun will always be pointed only at the Zionist enemy and peace can only be achieved through the gun."
Since Monday's attack, which was claimed by Islamic
Jihad, dozens of activists from all of the main armed factions have been arrested by Israeli troops in the West Bank. More than 20 Hamas members were arrested on Thursday, including the mayor of Bait Liqiya, a town near Ram Allah in the West Bank.
An Islamic Jihad official said that more than 120 of its members had been arrested since the bombing, which Mahmoud Abbas, the Palestinian leader, has condemned as a "terrorist attack". He vowed to hunt down the perpetrators.
Mahmud Zahar, another Hamas leader, said last month that the movement would not be obliged to prolong the truce if Israel did not end its attacks on Palestinian territory and free thousands of detained Palestinians.
Mushir al-Masri, a spokesman for Hamas, had also said that "the quiet will finish at the end of this year". Groups that signed up to the Cairo truce agreed at the time to review the situation before 2006, he said.
Maher al-Taher, for the PFLP, agreed that the Cairo truce had "no more sense, given the continued policies of terrorism and liquidation carried out by Israel".
The United States was unmoved by the decision of Hamas not to renew the truce. Adam Ereli, a spokesman for the State Department, said: "We've always made clear that truces are good only insofar as they go, and that's really not very far."
Hamas is due to take part in the Palestinian parliamentary elections on 25 January and stands to pose a serious challenge to Abbas's ruling Fatah party.