Hamas, which is enjoying increasing support from voters and is to stand in its first ever legislative poll on 25 January, openly calls for the destruction of Israel and advocates armed resistance to the Jewish state's occupation.
Israeli leaders are to begin meeting on Sunday to agree on Tel Aviv's stance should Hamas gain a majority in the Palestinian Authority, Israeli radio said, a development which could throw the troubled Middle East peace plan even further off track.
Shimon Peres, former prime minister, quoted by the radio, said: "Such a takeover would endanger the international assistance given to the Palestinians because no country would give financial or other help to an authority ruled by an armed terror organisation."
Consultations are to be headed by Dov Weisglass, chief adviser to Ariel Sharon, the Israeli prime minister, and are to include defence, foreign ministry and Shin Beth intelligence officials, the radio said.
Resistance to continue
In Damascus, Khalid Mishaal, political leader of Hamas, reaffirmed the group's intent to participate in Palestinian elections without abandoning what he called resistance against Israel.
"We will participate in the elections, and we will enter the political scene without compromising our rights," Mishaal said on Friday.
Mishaal: No one can deprive us of
our arms and right to resistance
"We won in municipal elections and we will carry the legislative elections," he told an enthusiastic crowd at the Palestinian Yarmuk refugee camp on the outskirts of Damascus to mark the resistance group's 18th anniversary.
Hamas scored a resounding victory in local elections in the main West Bank cities this month, in what was one of the clearest indicators of the movement's strength ahead of January's parliamentary contest.
Mishaal added: "No one in the world can deprive us of our arms and our right to resistance. This is a strategic choice to which we will adhere until Palestine is completely free and all the refugees are returned."
The US House of Representatives had backed a resolution in mid-December saying Hamas should not be allowed to participate in Palestinian elections until it recognised "Israel's right to exist as a Jewish state".
The resolution also urged Hamas - which is designated a terrorist group by the US State Department - to "permanently disarm and dismantle their terrorist infrastructure".