EU foreign ministers meeting in Brussels endorsed a decision by the European Commission to release 120 million euro (A$193 million) in funds to help the Palestinian Authority.
But they did not take any clear political stance on Hamas, which swept to victory in last month's legislative elections.
"The issue before the European Union is whether we resume aid to the existing interim authority, not to any Hamas government that has yet to be sworn in," British Foreign Secretary Jack Straw told reporters.
External Relations Commissioner Benita Ferrero-Waldner announced that the EU money would help the transitional Palestinian government meet its basic needs, such as energy bills and salaries, for about two months.
The move comes after intense discussion in the international community about whether to continue funding the Palestinian Authority when Hamas takes over.
Israeli sanctions
The EU's position has been complicated by Israel's decision to unilaterally sanction the Palestinian Authority, depriving it of around US$60 million (A$81.22 million) a month in taxes and customs duties.
"Certainly, Israel should pay this money because it's Palestinian money," Ms Ferrero-Waldner said. "I believe that it's important politically that it be done."
The Palestinian Authority, led by President Mahmoud Abbas from the Fatah faction, is desperate for funds and had to borrow money last month to pay the salaries of public servants.
According to international special envoy James Wolfensohn, the Palestinian government may face financial collapse within two weeks and the crisis could lead to violence and chaos.
Ms Ferrero-Waldner said about 40 million euro (A$64.4 million) would be used directly for the government's energy bills and there would be 64 million euro (A$103.04 million) in direct aid channelled through an UN agency for activities like education, health and social services.
On top of that, the commission aimed to release 17.5 million euro (A$28.18 million) from a World Bank trust fund to pay the transition government's salaries.
She said the commission, the EU's executive body, was releasing the funds because "we see the political necessity to support Abbas."
A Hamas official in Gaza City welcomed the release of the EU funds as a "very reasonable decision" and added: "The EU aid should continue when the new government takes up its duties".
Moscow visit
Russia’s foreign ministry has confirmed that Hamas officials will visit Moscow on March 3, a move likely to anger Israel and the United States.
It was unclear at what level the talks would be held but one senior Russian official was quoted as saying Foreign Minister Sergei Lavrov could receive a Hamas delegation headed by Khaled Meshaal, the politburo chief who lives in exile.
The Itar-Tass news agency reported that Mr Lavrov has said Russia will tell Hamas it must commit to seeking peace with Israel to win international acceptance.
That reflects the position of the international Quartet of Middle East mediators, grouping Russia, the UN, the EU and the US.