The United States is freezing the assets of six top figures in the militant Palestinian organisation Hamas, including its spiritual leader Sheikh Ahmed Yassin.
Sheikh Yassin (centre) mourned Abu Shanab in Gaza
President George Bush said the action was a response to Tuesday's suicide bombing by a Palestinian militant that killed 20 people on a Jerusalem bus.
The US administration is taking similar action against five groups alleged to have provided support for Hamas.
The announcement came as thousands of Palestinians turned out in Gaza for the funeral of a Hamas leader, Ismail Abu Shanab, killed in an Israeli air strike on Thursday.
Palestinian Authority officials warned on Friday that they could do little to curb militant activities as long as Israel continued its raids.
Israel has stepped up raids in West Bank towns
"The Palestinian leadership reiterates it is prepared to impose law and order...and punish all (law) violators, but this
can't be achieved while Israel pursues its war against the Palestinian Authority," said cabinet minister Yasser Abed Rabbo.
He was speaking after a cabinet meeting in Ramallah attended by Palestinian leader Yasser Arafat.
Israeli troops in the West Bank city of Nablus on Friday shot dead three Palestinian militants sheltering in a hospital, witnesses said.
The Palestinian Authority urged the United States to send monitors to help get the peace plan, known as the roadmap, back on track.
Palestinian militants declared their seven-week-old truce to be over after the killing of Abu Shanab.
Announcing the asset freeze, Mr Bush said that by claiming responsibility for the Jerusalem bus bombing, Hamas had "reaffirmed that it is a terrorist organisation committed to violence against Israelis and to
undermining progress towards peace".
"I call upon all nations supportive of peace in the Middle East to recognise
Hamas as a terrorist organisation and to take all appropriate actions to deny it
In addition to Sheikh Yassin, the US Treasury Department listed the Hamas members affected as: Imad Khalil Al-Alami, Usama Hamdan, Khalid Mishaal, Musa Abu Marzouk and Abdel Aziz Rantisi.
The charities named are:
Comite de Bienfaisance et de Secours aux Palestiniens (CBSP) of France
The Association de Secours Palestinien (ASP), of Switzerland.
The Palestinian Relief and Development Fund, or Interpal, based in Britain.
The Palestinian Association in Austria.
The Sanabil Association for Relief and Development, based in Lebanon.
"Hamas' leaders and those who provide their funding again have the blood of innocents on their hands," US Treasury Secretary John Snow said.
"Empty words cannot wash them clean. As they resist the road map for peace, Hamas is devastating the dreams of the Palestinian people for freedom, prosperity, and an independent state."
The Bush administration took similar action in December 2001 when it froze the assets of a US-based charity and two other groups accused of financing Hamas.
The charity - the Holy Land Foundation for Relief and Development - was at the time one of the largest Muslim organisations in the US.
But according to an administration official, it is the first time the Bush administration has taken action against organisations believed to be connected to Hamas in Europe.
Similar action has been taken worldwide against al-Qaeda
and other terror networks, however.
The administration official said several European countries supported the asset freeze, but that Washington was waiting to see the official response.