Foreign Minister Tzipi Livni, on a visit to Canada, made the remarks to reporters three days after EU leaders welcomed an agreement in Mecca last month between Hamas and the moderate Fatah to form a unity government.
"If somebody thinks that Hamas, while not recognizing Israel, while using terror not in order to create a Palestinian state but to demolish the Jewish one ... can be partners to something, they are wrong," she said.
"In a way this can lead to more stagnation at least, or to more terror."
The EU leaders said after a meeting in Brussels that they were ready to work with a Palestinian government that adopted a platform reflecting principles laid down by the Quartet of Middle East mediators - the United States, Russia, the EU and the United Nations.
The Quartet has called for a future government to accept Israel's right to exist, renounce violence and recognize past peace accords.
Livni urged the EU, which with the United States had suspended direct aid to the Palestinian government after Hamas beat Fatah in elections last year, to insist on the Quartet's conditions rather than giving in.
"Hamas are looking at Europe, and they want to see this kind of hesitation. When they sense this smell of hesitation, why should they change in the future?" she asked.
Livni also urged the UN Security Council to apply more sanctions on Iran for its refusal to halt uranium enrichment, rather than appease what she called "the bully of the neighborhood."
"If the international community will not do it, I believe we'll see a kind of domino effect, in which some other states ... will try to achieve their own nuclear weapon," she said.
Livni met Canadian Public Security Minister Stockwell Day on Monday and planned to meet Foreign Minister Peter MacKay on Tuesday. Canada vocally supported Israel's right to defend itself during the Israeli invasion of Lebanon last year.
She also addressed American Israel Public Affairs Committee (AIPAC) in Washington, D.C. Monday, where she warned the the U.S. not to show weakness in Iraq.