Rival Palestinian leaders from the West Bank and Gaza Strip have forged a new reconciliation agreement, angering Israel at a time when US-brokered peace talks are at a standstill.
Washington warned that the accord could seriously hamper American efforts to forge Israeli-Palestinian peace.
Israel's Prime Minister Benjamin Netanyahu slammed Palestinian president Mahmud Abbas for choosing "Hamas, not peace", and a Netanyahu aide said he had called off a peace meeting with the Palestinians scheduled for Wednesday evening.
However, chief Palestinian negotiator Saeb Erakat told AFP that no meeting had been planned for Wednesday.
He said the Palestinians would meet bilaterally with US peace envoy Martin Indyk in Ramallah on Thursday.
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Under the rapprochement between the Palestine Liberation Organisation (PLO), internationally recognised as the sole representative of the Palestinian people, and the Islamist Hamas which rules Gaza, the sides agreed to form a "national consensus" government within weeks.
"An agreement has been reached on the formation within five weeks of an independent government headed by president Mahmud Abbas," said a joint statement read by Hamas's Gaza premier Ismail Haniya in front of a visiting PLO delegation.
The new interim Palestinian administration would be charged with holding parliamentary and presidential elections within six months of taking office.
The news brought thousands of people on to Gaza's streets in celebration.
It was not the first time the Palestinian rivals have announced a deal to end seven years of separate administrations in the West Bank and Gaza.
But the latest reconciliation attempt by the West Bank-based Palestinian leadership drew an angry reaction from Netanyahu.
"This evening... Abu Mazen chose Hamas, not peace," a statement from Netanyahu's office quoted him as saying, using the name by which Abbas is familiarly known.
"Whoever chooses Hamas does not want peace."
Abbas denied the charge, saying in a statement: "There is no incompatibility between reconciliation and the talks, especially since we are committed to a just peace on the basis of a two-state solution in accordance with the resolutions of international law."
Later on Wednesday, the Israeli military said Palestinians fired three rockets from the Gaza Strip at southern Israel, one of which hit a compound adjacent to the Erez border crossing.
It later said that it was investigating if that rocket fell on the Israel or Gaza side.
There were no reports of casualties.
