Israel has said it will not deal with a Palestinian government including Hamas, following the Islamic militant group's sweeping victory in Palestinian polls.
Israeli interim Prime Minister Ehud Olmert ruled out any talks with "an armed terror organisation that calls for Israel's destruction".
International mediators have urged Hamas to renounce violence, as efforts begin to form a new government.
Near-complete results gave Hamas 76 of the 132 seats in parliament.
Palestinian leader Mahmoud Abbas - who also heads the ruling Fatah party - has said he remains committed to a peaceful settlement.
Prime Minister Ahmed Qurei of Fatah has offered to resign, and the party has said it will not join Hamas in government.
Hamas' victory poses problems for efforts to restart peace talks with Israel, analysts say.
Mr Olmert's statement came after a three-hour emergency meeting of the Israeli government on Thursday.
Israeli Foreign Minister Tsipi Livni, meanwhile, called on the EU - the biggest financial donors to the Palestinian Authority - to oppose the creation of a "terrorist government".
The BBC's Richard Miron in Jerusalem says Israel did not expect this result in the Palestinian vote - and it is the one they probably most feared.
Our correspondent adds that the mood in Israel is one of gloom.
The Middle East "Quartet" - the US, UN, EU and Russia - issued a statement later on Thursday, calling on Hamas to renounce violence and accept Israel's right to exist.
The group will hold talks in London on Monday to decide what to do after the victory.
US President George W Bush said Washington would not deal with Hamas unless it rejected its call to destroy Israel.
Hamas co-founder Mahmoud Zahhar said: "We are not playing terrorism or violence. We are under occupation."
"The Israelis are continuing their aggression against our people, killing, detention, demolition and in order to stop these processes, we run effective self defence by all means, including using guns," he told BBC World TV.
Hamas and Fatah supporters clashed on Thursday in the West Bank town of Ramallah. Shots were fired in the air and some injuries were reported.
Election commission head Hanna Nasser said 95% of the votes had now been counted, and the results could still change slightly.
Mr Abbas will now have to discuss with Hamas the formation of a new government and the appointment of a prime minister.
Hamas leaders have said they want to open talks with other groups - including Fatah - about a political partnership.
Hamas' strong showing has caused consternation in Israel and the US
1) Fatah: 55 seats
2) Independent Fatah: 7 seats
3) Independent Islamists: 4
4) Independent Christians: 3
5) Independents: 15 seats
6) Samaritans: 1 seat
7) Others: 1 seat
8): Vacant: 2 seats
1) Hamas - 76 seats
2) Fatah - 43 seats
3) PFLP - 3 seats
4) Badeel - 2 seats
5) Independent Palestine - 2
6) Third Way - 2 seats
7) Independent/other - 4