Israel said on Monday it was "deeply disappointed" by the US State Department saying it would work with a Palestinian unity government that includes Hamas Islamists opposed to Israel's existence.
In a statement to reporters issued after Washington's announcement, an Israeli official, speaking on condition of anonymity said: "We are deeply disappointed by the State Department regarding working with the Palestinian unity government."
The statement said Washington could advance peacemaking by urging Western-backed Palestinian President Mahmoud Abbas "to end his pact with Hamas and return to peace talks with Israel".
"Based on what we know now, we intend to work with this government," State Department spokeswoman Jen Psaki told reporters earlier on Monday. "We will continue to evaluate the composition and policies of the new government, and if needed, we will recalibrate our approach."
Ministers in the new administration, whom Abbas has said would be politically unaffiliated, took the oath of office in a televised ceremony in Ramallah.
Psaki said the Obama administration has no intention of cutting off aid to the Palestinian Authority, which amounts to roughly $500 million a year-- pivotal funding for the cash-strapped organization.
The ministers in the government "appear to be technocratic," she said, adding that the US "will be judging this government by its actions."
US Secretary of State John Kerry spoke with Prime Minister Benyamin Netanyahu by phone moments before Psaki's announcement.
On Sunday, Netanyahu called on the international community not to "run to recognize" the government which "rests of Hamas," a terrorist organization as listed by the US, European Union, and Israel.
US financial aid to the Palestinian Authority through 2014 has already been appropriated by the US Congress, but not obligated; the State Department must approve requests for how the funds are spent, and the PA must file those requests.
Funding for 2015 has not yet been drafted, and already, members of the appropriations committees on Capitol Hill are suggesting a cut in aid because of the deal.
"As long as Hamas rejects the Quartet principles and the existence of the State of Israel, United States funding for this unity government is in jeopardy," said Congresswoman Nita Lowey (D-NY), ranking member on the House Appropriations Committee, expressing "deeply disappointment" with the development.
"Hamas is no partner for peace, nor a legitimate recipient of aid," Congressman Ed Royce (R-CA), chairman of the House of Representatives Foreign Affairs Committee, said in a statement. "While the 'unity government' hides behind the facade of nonpartisan bureaucrats, it was only born out of support from Hamas - a terrorist organization that continues to call for Israel's annihilation."
American Jewish organizations reacted to the announcement in its own unified alignment on Monday, roundly condemning the move.
"The Fatah-Hamas unity government is a marriage involving an unabashed terrorist partner and, therefore, another setback to any prospect for peace," said David Harris, executive director of the American Jewish Committee.
In a statement released by the American Israel Public Affairs Committee (AIPAC), the group said it was "greatly concerned and disappointed" with the formation of the Fatah-Hamas unity government, adding that, "The embrace of the notorious Islamist terrorist organization is a disturbing setback to peace."
AIPAC added that US law says that no funds can be transferred to a Palestinian government that includes, or is influenced by, Hamas, and urged Congress to review American aid to the Palestinian Authority.
"The potential benefit of political unification is that it allows the Palestinian president to negotiate with Israel on behalf of all Palestinians," J Street, a Washington lobby focused on the two-state solution, published in a statement. Echoing the State Department, the J Street statement continued: "the true test of the new Palestinian government should be the policies it follows."