A Palestinian unity government was sworn in on Monday after a landmark reconciliation deal with the Islamist movement Hamas that Israel plans to boycott but Washington said it will work with.
President Mahmud Abbas, following a ceremony at the Muqataa presidential compound in the West Bank city of Ramallah, hailed "the end" of a bitter and sometimes bloody divide between his Fatah movement and rival Hamas, which rules Gaza.
Hamas applauded the new government as representing "all Palestinians," saying it was a "turning point" in its relations with Fatah, which dominates Abbas's Palestinian Authority (PA).
The long-awaited new cabinet was the product of an internal agreement between Fatah and Hamas, which has been blacklisted by Washington and the European Union as a "terror organisation".
In an early boost for the new team, Washington said on Monday it will work with the unity government and maintain aid, while "watching closely" to ensure it respects the principle of non-violence.
State Department spokeswoman Jen Psaki said Washington believes Abbas has "formed an interim technocratic government... that does not include members affiliated with Hamas."
"With what we know now, we will work with this government," Psaki said.
The United States "will be watching closely to ensure that it upholds principles" of non-violence and recognition of the state of Israel, she warned, while confirming that millions of dollars in US aid to the PA would continue.
Israel was swift to voice its displeasure.
"We are deeply disappointed by the comments of the State Department regarding working with the Palestinian unity government," a government official said.
The United States is "enabling Abbas to believe that it is acceptable to form a government with a terrorist organisation," the official told AFP, declining to be named.
Standing on a red carpet lined with Palestinian flags, the new ministers filed past, each laying their hand on either a Koran or a Bible to take the oath of office as Abbas stood by.
It is the first Palestinian unity government for seven years, and the first concrete outcome of the landmark April reconciliation deal.
"Today, with the formation of a national consensus government, we announce the end of a Palestinian division that has greatly damaged our national case," Abbas said.
"This black page in history has been turned forever," he said in remarks echoed by the outgoing Hamas government in Gaza.
"We hail the national consensus government, which represents all the Palestinian people," Hamas spokesman Sami Abu Zuhri told AFP.
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- 'Government of one people' -
The new cabinet pieced together by Fatah and Hamas counts 17 ministers, all of them political independents.
Technocratic in nature, it includes five ministers from Gaza, and will not have a political mandate.
Shortly after the ceremony, Gaza's Hamas prime minister Ismail Haniya and his cabinet resigned.
"We're leaving the ministries but not the question of the nation," Haniya said in a televised speech, describing the cabinet as "a government of one people and one political system."
Abbas has pledged the new administration will abide by the principles laid down by the Middle East peace Quartet -- to recognise Israel, reject violence and abide by all existing agreements.
Under the terms of a deal signed on April 23, the Fatah-led Palestine Liberation Organisation agreed to work with Hamas to establish an interim government of independents that would organise long-delayed elections.
The surprise agreement sought to end years of rivalry which saw the establishment of separate Palestinian administrations in the West Bank and Gaza.
- 'Terrorists in suits' -
In Israel, Prime Minister Benjamin Netanyahu convened a security cabinet meeting that threatened new sanctions against the PA in response.
The meeting decided "to authorise the prime minister to impose additional sanctions on the Palestinian Authority," a statement from Netanyahu's office said, without elaborating.
The statement added it would hold the PA entirely responsible for any attacks against Israel.
"The agreement with Hamas makes Abu Mazen (Abbas) directly responsible for the terrorism emanating from Gaza," it quoted Netanyahu as saying.
Israel has made no secret of its opposition to the unity agreement with Hamas, which is sworn to the Jewish state's destruction.