JERUSALEM (REUTERS) - 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".

Israel suspended the talks last month after Abbas made an initial deal with Hamas, which Israel shuns as a terrorist organisation.