Newly-elected members of militant group Hamas have taken their seats in the new Palestinian parliament, rejecting calls for negotiations with Israel.
The Hamas members who dominate the new assembly criticised Palestinian leader Mahmoud Abbas's call for peace talks.
After the swearing-in ceremony, Mr Abbas said Hamas would be forming the next government but urged it to respect the Oslo accords signed with Israel.
He also hit out at unilateral Israeli measures and military strikes.
Hamas have already nominated a senior Gaza Strip leader, Ismail Haniya, as their prime minister.
Academic Aziz al-Duwaik, another Hamas representative, has already been confirmed as speaker of the parliament - the Palestinian Legislative Council (PLC).
Hope v despair
The group's Gaza-based members joined the ceremony by video link, as Israel has not allowed them to travel to the West Bank town of Ramallah.
In a wide-ranging speech, Mr Abbas reminded delegates of his commitment to negotiations.
He called for greater funds to develop Palestinian institutions, and insisted that only "one legitimate force" should operate within the Palestinian Authority.
Hamas, which refuses to recognise Israel, has waged an armed campaign against Israel and retains an extensive armed wing.
Palestinians must aim for a free society, Mr Abbas said, where hope replaces despair.
He urged Hamas to respect the process of negotiation, but reserved strong words for Israel, insisting that the Palestinians would not accept a state with temporary borders.
"In order to achieve security we must have peace. There is no military solution to this conflict," Mr Abbas.
"The continuation of occupation and settlement... will only increase despair. Let us make peace so we can live in two states side by side."
Mr Abbas' comments were swiftly rejected by Hamas spokesman Sami abu-Zuhri.
"Hamas rejects negotiations with the occupation under the current circumstances, while occupation and aggression continues," he said.
"We re-emphasise the commitment to [armed] resistance as a natural right of our people."
Hamas' nominee for PM, Ismail Haniya (l) listened in Gaza
Israel refuses to deal with Hamas unless the militant group recognises their state and lays down its arms.
Speaking to the BBC, Aziz al-Duwaik, the newly-chosen PLC speaker, said the issue of recognising Israel was a two-way process.
"Any kind of recognition should go between a state and a state and this is not the case in our situation."
Hamas controls the new parliament 74 members - with just 45 representatives from Mr Abbas' Fatah party, formerly the dominant group.
Israel has postponed until Sunday any decision on whether to impose sanctions on the Palestinian Authority after Hamas' election win.
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 - 74 seats
2) Fatah - 45 seats
3) PFLP - 3 seats
4) Badeel - 2 seats
5) Independent Palestine - 2
6) Third Way - 2