The United States would have to reconsider its assistance to the Palestinians if Islamist group Hamas and the Palestinian Liberation Organization form a government together, a senior US administration official said on Thursday.

Gaza-based Hamas - which is listed by the US as a terrorist organisation - and President Mahmoud Abbas's West Bank-based PLO announced a unity pact on Wednesday, complicating US-brokered peace talks with Israel that Washington is already struggling to extend past an April 29 deadline.

Prime Minister Benjamin Netanyahu, who had warned Abbas against pursuing reconciliation with Hamas, convened his security cabinet to discuss Israel's next moves.

"Any Palestinian government must unambiguously and explicitly commit to non-violence, recognition of the state of Israel, and acceptance of previous agreements and obligations between the parties," the US official said, listing terms Hamas has long rejected.

"If a new Palestinian government is formed, we will assess it based on its adherence to the stipulations above, its policies and actions, and will determine any implications for our assistance based on US law," the official said, speaking to Reuters on condition of anonymity.

The move, coming after a long line of failed efforts to reconcile after seven years of internal bickering, envisions a unity government within five weeks and national elections six months later.

However providing US aid to a unity government that includes Hamas would be assistance to a group the US lists as a terrorist organisation. Both the US and Israel greeted the announcement of the unity pact with dismay.

Israel, whose government includes ministers opposed to the creation of a Palestinian state, cancelled a session of talks with the Palestinians that had been scheduled for Wednesday, and the State Department said the unity move could derail peace efforts.

Asked whether the reconciliation moves would incur promised US sanctions, PLO Deputy Secretary Yasser Abed Rabo told Palestinian radio it was too soon to penalise a government that had yet to be formed.

"There's no need for the Americans to get ahead of themselves over this. What happened in Gaza in the last two days is just a first step which we welcome and want to reinforce," he said.

"But this step shouldn't be exaggerated, that an agreement for reconciliation has been completely reached... We need to watch the behaviour of Hamas on many details during the coming days and weeks on forming a government and other things."

Hamas, which won a Palestinian election in 2006, wrested control of the Gaza Strip from forces loyal to Abbas in 2007. Questions of sovereignty over the territory, the composition of a unity government and the future of Hamas security forces are main stumbling blocks to a unity government. - Reuters