Hamas leader Khaled Meshaal on Wednesday challenged Israel to peace, offering to work with Palestinian President Mahmoud Abbas and Egypt on a new strategy to solve the Arab-Israeli conflict.

But Meshaal, addressing a meeting in Cairo to announce a reconciliation agreement between his Islamist group and its secular Fatah rival, said he did not believe Israel was ready for peace with any Palestinians.

Open gallery view Hamas leader Khaled Meshaal Credit: AP

"We have given peace since Madrid till now 20 years, and I say we are ready to agree among us Palestinians and with Arab support to give an additional chance," Meshaal said, referring to the 1991 international Middle East peace conference that launched Israeli-Arab peace talks.

"But, dear brothers, because Israel does not respect us, and because Israel has rejected all our initiatives and because Israel deliberately rejects Palestinian rights, rejects Fatah members as well as Hamas...it wants the land, security and claims to want peace," he said.

Israel regards Hamas, whose founding charter calls for its destruction of the Jewish state, as a terrorist organization. Hamas has opposed Abbas' peace efforts with Israel.

Prime Minister Benjamin Netanyahu condemned the new unity pact between Hamas and Fatah as a "mortal blow to peace and a great victory for terrorism".

Meshaal said that Egypt, the Arab League and the Muslim World's largest body, the Islamic Organisation Conference, must work together to search for a new strategy.

"We don't want to declare war on any one," Meshaal said.

"We want to wrench our rights and draft a new strategy for ourselves, to master all forms of power that will force Netanyahu to withdraw from our lands and to recognize our rights," he added.

"We are telling the world: stand with us."