Palestinian president Mahmoud Abbas has described the Holocaust as the most heinous crime against humanity in modern history.
His remarks were released before Israel began marking Holocaust remembrance day.
But Israeli Prime Minister Benjamin Netanyahu said Mr Abbas "can't say the Holocaust is terrible while ... embracing those who seek the destruction of the Jewish people".
Israel is opposed to a recent unity deal between Fatah and Hamas.
The BBC reports Hamas officials have made statements denying the Holocaust. In 2009 they objected to a UN proposal to teach children about it in UN schools in Gaza.
About six million Jews were murdered during World War II.
In his statement, Mr Abbas "expressed his sympathy with the families of the victims and many other innocent people who were killed by the Nazis".
"The Holocaust is a reflection of the concept of ethnic discrimination and racism which the Palestinians strongly reject and act against," he went on.
The BBC reports he also urged the Israeli government to use "the incredibly sad commemoration of Holocaust day" to take the chance to find a "just and comprehensive" peace with his people, based on a two-state solution.
On Thursday, Israel's security cabinet decided to suspend the latest round of peace talks after Mr Fatah and Hamas agreed to set up a new unity government.
Israel - along with the United States and the European Union - views Hamas as a terrorist organisation.
Mr Netanyahu told CNN on Sunday that Israel "will not negotiate with a government backed by Hamas".
However, Mr Abbas has said he is still interested in extending peace negotiations.