Palestinian Rivals Fatah and Hamas have officially announced a reconciliation deal, seeking to form a unity government in the coming weeks.
Since the factions' violent split in 2007, Hamas and Fatah have attempted to reconcile on multiple occasions. However, previous reconciliation deals in Doha and Cairo were never implemented.
"This is the good news we tell our people," said Hamas Prime Minister Ismail Haniyeh. "The era of division is over."
Hamas is a designated terrorist organization that is committed to the destruction of Israel.
Israeli Prime Minister Benjamin Netanyahu warned that Palestinian Authority President Mahmoud Abbas has to choose between peace with Israel and peace with Hamas.
"You can have one but not the other. I hope he chooses peace; so far he hasn't done so." Netanyahu said.
As a result, Israel cancelled a planned meeting Wednesday night with Palestinian officials over extending the peace negotiations.
Many politicians in Israel criticized Abbas decision to reconcile with Hamas, which remains dedicated to Israel's destruction. Economy Minister Naftali Bennett said: "We don't talk to murderers. The agreement between Fatah, Hamas, and Islamic Jihad brings the Middle East to a new diplomatic era. The Palestinian Authority turned into the largest terrorist organization in the world, 20 minutes from Tel Aviv."
According to Foreign Minister Avigdor Lieberman, a unity agreement between Hamas and Fatah would mean the end of peace talks between Israel and the Palestinian Authority.
An unnamed senior U.S. official told Israel's Haaretz that any Palestinian unity government must recognize Israel, renounce violence and abide by previous agreements.
"We have been clear about the principles that must guide a Palestinian government in order for it to play a constructive role in achieving peace and building an independent Palestinian state," the official said.
It was not clear what the U.S. would do when those conditions are not met.