Senior Israeli officials said Monday that Israel is deeply disappointed with the State Department's announcement that the U.S. will continue to work with the new Palestinian unity government.

"We are deeply disappointed by the comments of the State Department regarding working with the Palestinian unity government," the officials said.

State Department Spokeswoman Jen Psaki said earlier Monday that the U.S. intends to work with the new Fatah-Hamas government but will be watching it closely to ensure that it upholds the principles of the Quartet - recognize Israel, reject terror, and honor previously signed agreements.

The Israeli officials went as far as to blame the U.S. for setting back the peace process between Israel and the Palestinians.

"This Palestinian government is a government backed by Hamas, which is a terror organization committed to Israel's destruction," they said. "If the U.S. administration wants to advance peace, it should be calling on Abbas to end his pact with Hamas and return to peace talks with Israel. Instead, it is enabling Abbas to believe that it is acceptable to form a government with a terrorist organization."

Communications Minister Gilad Erdan, who is a member of the cabinet, blasted  "America's naivete," adding that the U.S. "surrender to Palestinian dictates" severely diminishes the chances of returning to the negotiating table, and will force Israel to take unilateral measures in order to protect its citizens from "Abbas' terror government." 

Earlier Monday, Israel's security cabinet decided that it will not hold negotiationswith the new Palestinian unity government and will oppose Hamas participation in the Palestinian elections if and when they take place.

“Israel will work, including in the international arena, to oppose the participation of terrorist organizations in the elections,” the panel said in a statement issued at the end of its two-and-a-half-hour meeting.

Prime Minister Benjamin Netanyahu told a meeting of the Knesset Foreign Affairs and Defense Committee that Israel would not allow the Palestinian Authority to conduct elections in East Jerusalem for either its parliamentary or its presidential election, if the Fatah-Hamas unity government indeed leads to such elections being held in another few months, as called for in their reconciliation deal.

In a post on his Facebook page, Israel's ambassador to Washington Ron Dermer repeated Israel's disappointment at the American willingness to work with a government including Hamas - "a terrorist organization responsible for the murder of many hundreds of Israelis, which has fired thousands of rockets at Israeli cities, and which remains committed to Israel's destruction."

Had Hamas changed, it would be one thing, Dermer wrote. "But Hamas hasn't changed. It remains as committed to Israel's destruction today as it was yesterday. This Palestinian unity government is a government of technocrats backed by terrorists, and should be treated as such.

"With suits in the front office and terrorists in the back office, it should not be business as usual."