A future Palestinian national unity government will not agree to demands that it recognise Israel, the ruling Hamas faction has said.
PM Ismail Haniya says he is willing to resign to end the West's boycott
The demand that Hamas renounce violence and recognise Israel is at the heart of a dispute with Western donors who have cut off direct aid.
Unity talks continue between Hamas and the other Palestinian faction Fatah.
On Monday, the factions appeared to make some progress with agreement on a candidate for prime minister.
A Hamas spokesman said on Tuesday that Hamas "was not favourable to the two-state solution [a Palestinian state alongside a secure Israel] because that would entail recognition of Israel".
Another official said the question of recognising Israel was "an unprecedented one on the international level".
"The next government was not asked to recognise Israel and it will not do so," Moussa Abu Marzouq, the second-in-command of Hamas's political bureau based in Damascus, told Palestinian press agency Ramattan.
"It was not asked from the two Germanys to recognise each other, while the whole world recognised them.
"Why should Palestine, which is not yet a state, recognise Israel?" he said, also citing as examples China and Taiwan.
Monday's reports that Fatah and Hamas had agreed on a candidate for prime minister have not been officially confirmed.
A senior Hamas official based in Syria said the new government would be led by Muhammad Shbeir, an academic who is close to Hamas but says he is not a member.
The two sides have been deadlocked for months over the formation of a national unity government acceptable to the West.
Sanctions on the new Hamas-led administration were imposed in March by Israel and Western countries, which see Hamas as a terrorist organisation.
The current prime minister, Ismail Haniya, said last week he was willing to resign if it would end the crippling Western aid boycott against the administration.