The rejection of the expected $15m on Thursday raised fears of fresh tensions along the Gaza-Israel border, ahead of weekly protests on Friday.
“We refuse to receive the third Qatari grant in response to the [Israeli] occupation’s behaviour and attempts to evade the agreement,” Khalil al-Hayya, Hamas’s deputy head in Gaza, told journalists on Thursday.
Al-Hayya did not mention the specific conditions that were changed but said Israel was playing politics with the funds ahead of upcoming elections.
Under an informal agreement struck in November, Gulf state Qatar has sent $15m a month into the strip.
The payment would have been the third of six planned tranches, totalling $90 million, in connection with the truce.
The funds to pay salaries of Hamas employees and support impoverished residents of Gaza are in exchange for relative calm along the border, where protests have taken place since March 2018.
Israel’s permission is required since the cash must be delivered via its territory.
Reporting from the Gaza Strip, Al Jazeera’s Charles Stratford said: “This reference to political blackmail, as Hamas is calling it, comes during election season in Israel”.
“Hamas are refusing to accept these conditions because Israel is demanding that if these funds come through, there has to be a halt to protests.”
The payment had been expected to enter this week but Israeli Prime Minister Benjamin Netanyahu blocked it on Tuesday after two shooting incidents along the Gaza border, including one in which a soldier was injured.
“Netanyahu cannot be seen to be soft on Hamas, but at the same time does not want another war before the elections,” added Stratford.
Mohammed al-Emadi, ambassador of the Gulf state to Gaza, met Hamas officials, including leader Ismail Haniya, in the enclave on Thursday.
Israeli media reported that the country’s security cabinet had approved the funds.