Hamas leader Khaled Meshaal has dismissed the terms for a demilitarised state laid out by Israeli Prime Minister Benjamin Netanyahu.
Mr Netanyahu offered "merely self-governance under the name of a country," Mr Meshaal said.
Speaking in Damascus, he described the demand that the Palestinians recognise Israel as a Jewish state as "racist".
But he hailed what he said was "new language" towards Hamas from US President Barack Obama.
The exiled leader of the Palestinian militant Islamist movement, which backs attacks on Israel, was speaking in the wake of key address by both Mr Obama and Mr Netanyahu.
The US regards Hamas as a terrorist organisation and does not deal with it, but Mr Obama acknowledged that many Palestinians support the group.
Mr Netanyahu bowed to heavy US pressure to endorse the principle of a Palestinian state, but said it must have no military, no control of its air space and must recognise Israel as a Jewish state.
"The enemy's leaders call for a so-called Jewish state is a racist demand that is no different from calls by Italian Fascists and Hitler's Nazism," Mr Meshaal said.
He reiterated Hamas's position that its "minimum demands" are "the establishment of a Palestinian state, with Jerusalem as its capital, that has full sovereignty on the borders of 4 June 1967... the removal of all settlements and the achievement of the right of return".
In his speech two weeks ago, Mr Netanyahu said Jerusalem should be the undivided capital of Israel and made clear that he wished to continue limited settlement activity in the West Bank and that he rejected the right Palestinian refugees want to return to Israel.
Mr Meshaal also welcomed Mr Obama's recent comments.
"We value Obama's new language towards Hamas. It is a first step in the right direction toward direct talks with no conditions," he said.
The international community is demanding that Hamas renounce violence and recognise Israel before it will hold direct talks with the group, which controls Gaza.
Unity talks to end the feud between Hamas and the West Bank-based Palestinian Authority have so far failed.