The triumph by the Islamic militant group plunged the future of Mideast peacemaking into turmoil, with Israel saying it would not negotiate with a Palestinian government that includes members of Hamas.
Palestinian leaders, stunned by the militant group's sweeping victory, huddled to determine the shape of a new government as world leaders, including President Bush, insisted Hamas renounce violence and recognize Israel's right to exist.
It's the first time ever that militant Islamists have to come into power peacefully, in a democratic election considered free and fair by international observers, reports CBS News correspondent David Hakwins.
"I think it's almost a miracle the Palestinians were able to pull this off," Former President Jimmy Carter said.
Supporters of the two main parties briefly scuffled in Ramallah after Hamas supporters raised their party's green flag over the parliament. The two sides threw stones at each other, breaking windows in the building, as a small group of Fatah supporters tried to lower the banner. The crowd of about 3,000 Hamas backers cheered and whistled as activists on the roof raised the flag again.
Hamas won 76 seats in the 132-member parliament, while Fatah, which controlled Palestinian politics for four decades, won 43 seats, said Hanna Nasser, head of the Central Election commission. The 13 remaining seats went to several smaller parties and independents.
The result was based on a count of 95 percent of the vote and still could change slightly, Nasser said.
Hamas won 60.3 percent of the vote, said Ismail Haniyeh, one of the group's leaders.
In his first remarks since the election, acting Israeli Prime Minister Ehud Olmert said Israel won't negotiate with a Palestinian government that includes Hamas members.
"The state of Israel will not negotiate with a Palestinian administration if even part of it is an armed terrorist organization calling for the destruction of the state of Israel," said Olmert's statement, issued after a three-hour emergency Cabinet meeting.
Other Israeli politicians from across the political spectrum said there could be no relations with a group that has been responsible for scores of deadly attacks against Israelis and is listed as a terror organization by the United States and the European Union.
Benjamin Netanyahu, leader of the opposition Likud Party, condemned the vote. "Today Hamastan was formed," he said. Labor Party politician Ami Ayalon said Israel might have to change the route of its West Bank security barrier to take Hamas' victory into account.
In a televised speech Thursday night, Abbas suggested that future negotiations with Israel be conducted through the Palestine Liberation Organization, a possible bypass of a Hamas-led government.
"We are going to reactivate the role of the PLO," said Abbas, who was elected separately a year ago and remains president of the Palestinian Authority as well as head of the PLO.
The PLO was founded as the umbrella group of Palestinian organizations several decades ago, but its importance has withered since the establishment of the Palestinian Authority in 1994.
He has said he would resign if he could no longer pursue his peace agenda. The Cabinet and legislature must approve any major initiative by Abbas, giving Hamas tremendous influence over peace moves.
Abbas also said he would begin immediate consultations to form a new government but did not specifically refer to Hamas' sweeping election victory. He said he remained committed to previous peace deals and the "road map."
Hamas' exiled supreme leader, Khaled Mashaal, called Abbas from Syria to discuss the results. "He stressed Hamas insists on a partnership with all the Palestinian factions, especially our brothers in Fatah," Hamas said on its Web site.
In a first sign of pragmatism, Mahmoud Zahar, a top Hamas official, said the group would extend its year-old truce if Israel reciprocates. "If not, then I think we will have no option but to protect our people and our land," he told Associated Press Television News.
Bush said the United States will not deal with Palestinian leaders who dispute Israel's right to exist.
"If your platform is the destruction of Israel, it means you're not a partner in peace, and we're interested in peace," Bush said.
Palestinian Prime Minister Ahmed Qureia and his Cabinet resigned even before the election results were announced.
Fatah legislator Saeb Erekat, who led Palestinians in negotiations with Israel, said the party does not want to join a Hamas government. "We will be a loyal opposition and rebuild the party," Erekat said, after meeting with Abbas. But Nabil Shaath, another senior Fatah lawmaker, said the party's leadership would make a decision later Thursday.
Leaders around the world were shocked by Hamas' victory, with Italian Premier Silvio Berlusconi reportedly calling it a "very, very, very bad result," and others insisting Hamas give up violence and recognize Israel's right to exist.
"You cannot have one foot in politics and another in terror," Secretary of State Condoleezza Rice said.
Hamas capitalized on widespread discontent with years of Fatah corruption and ineffectiveness. Much of its campaign focused on internal Palestinian issues, while playing down the conflict with Israel.
Before the election, Hamas had suggested it would be content as a junior partner in the next government, thus avoiding a decision on its relationship with Israel.
Throughout the campaign, leaders sent mixed signals, hinting they could be open to some sort of accommodation with Israel. Its apparent victory will now force it to take a clearer position on key issues, including whether to abandon its violent ideology.
Hamas officials tried to reassure the world of its intentions.
"Don't be afraid," Ismail Haniyeh, a Hamas leader, told the BBC. "Hamas is a Palestinian movement, it is an aware and mature movement, one which is politically open in the Palestinian arena, and to its Arab and Islamic hinterland, and similarly open to the international arena."
Initial exit polls had given Fatah a slight edge. Palestinian pollsters were at a loss to explain the discrepancy between the exit polls and the result. It may have been partly due to a reluctance by some voters to admit to pollsters that they were abandoning the ruling party.