JERUSALEM (AFP) - Israel said Thursday it was halting peace talks with the Palestinians, following a unity deal struck between the Palestinian leadership and the Islamist Hamas rulers of the Gaza Strip.

"The cabinet has unanimously decided that the Israeli government will not negotiate with a Palestinian government backed by Hamas, a terror organisation that calls for the destruction of Israel," a statement from the office of Prime Minister Benjamin Netanyahu read.

"In addition, Israel will take a number of measures in response to the PA's (Palestinian Authority) unilateral moves."

On Wednesday, the Palestine Liberation Organisation (PLO) - internationally recognised as the sole representative of the Palestinian people - and Hamas signed a reconciliation agreement.

Under the agreement, which came as the US-brokered peace talks were at a standstill, the sides agreed to form a "national consensus" government under Palestinian president Mahmud Abbas, who rules the West Bank, within weeks.

"Instead of choosing peace, Abu Mazen (Abbas) made a pact with a murderous terror organisation that calls for the destruction of Israel," Mr Netanyahu said in a statement, following a five-hour meeting with his security cabinet.

Mr Netanyahu said the unity deal was signed "while Israel was making efforts to advance the negotiations with the Palestinians" and was "a direct continuation of the Palestinian recalcitrance to promote negotiations."

Mr Abbas "rejected the principles of the framework (to extend peace talks) proposed by the US, and refused to even discuss recognising Israel as the Jewish State," he added."Whoever chooses the Hamas terror does not want peace," Mr Netanyahu said of Mr Abbas.

The Palestinian move came as the US was making last-ditch efforts to extend the talks beyond their April 29 deadline.