President Bush has insisted the United States will have no contact with newly elected Hamas leaders of the Palestinian government until the militant group recognises Israel.
Mr Bush and German Chancellor Angela Merkel, speaking at the 100th-anniversary gala of the American Jewish Committee, presented a united front on Hamas and Iran - both of which have refused to recognise Israel.
"Hamas has made it clear that they do not acknowledge the right of Israel to exist, and I made it clear that so long as that's their policy we will have no contact with the leaders of Hamas," Mr Bush said.
"Hamas must accept the demands of the international community to recognise Israel, disarm and reject terrorism, and stop blocking the path to peace," the president said
The United States and the European Union have cut off direct financial support for the Palestinian Authority, which has been unable to receive funds from abroad because local, regional and international banks fear sanctions by the United States, which regards Hamas as a terrorist organisation.
Mr Bush's comments came after Israeli Prime Minister Ehud Olmert repeated his intention to retain control of large settlements in the West Bank.
In a policy speech to parliament, Mr Olmert said yesterday that Israel needed to rid itself of isolated West Bank settlements but would maintain control over the larger blocs forever.
Israel has been in occupation of the West Bank since the 1967 Arab-Israeli war, and its settlements are considered illegal under international law.