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Ammon News - GAZA (Reuters) - Islamist Hamas's leader in the Gaza Strip on Friday rejected a revised Middle East peace initiative put forward by the Arab League, saying outsiders could not decide the fate of the Palestinians.

In meetings this week in Washington, Arab states appeared to soften their 2002 peace plan, acknowledging that Israelis and Palestinians may have to swap land in any eventual peace deal.

The United States and the Palestinian leadership in the West Bank praised the move. But speaking to hundreds of worshippers in a Gaza mosque, senior Hamas official Ismail Haniyeh said it was a concession that other Arabs were not authorized to make.

"The so-called new Arab initiative is rejected by our people, by our nation and no one can accept it," said Haniyeh, prime minister of the Hamas government in the coastal enclave.

"The initiative contains numerous dangers to our people in the occupied land of 1967, 1948 and to our people in exile."

He was referring to the partition of British-mandate Palestine in 1948 when the United Nations voted to divide the territory into a Jewish state and an Arab state, and to the 1967 war when Israel captured the West Bank, East Jerusalem and Gaza.

Hamas refuses to recognize Israel's right to exist and claims all the territory between the Mediterranean and the Jordan river as rightfully Palestinian. It never accepted the Arab plan which was first presented in 2002.

RARE SPAT

The modified version was announced by Qatar's prime minister on Monday and Haniyeh's comments represented a rare public disagreement between Hamas and one of its main supporters.

The rich Gulf state has pledged over $400 million to fund housing projects in the Gaza Strip, which Hamas seized from the rival Palestinian Fatah faction in a brief civil war in 2007.

"To those who speak of land swaps we say: Palestine is not a property, it is not for sale, not for a swap and cannot be traded," Haniyeh said.

Haniyeh said the rival Palestinian Authority, headed by Western-backed Palestinian President Mahmoud Abbas, was to blame for inspiring the softer Arab position because it accepted the need for land swaps with Israel.

Israel rejected the Arab peace plan when it was proposed 11 years ago. Israeli officials gave a cautious welcome to the new suggestions, but the government still objects to key points, including the "right of return" for Palestinian refugees and the creation of a Palestinian capital in East Jerusalem.

U.S. Secretary of State John Kerry is seeking to revive direct peace talks that broke down in 2010 over the issue of Jewish settlement building in East Jerusalem and the West Bank.

On Tuesday, he hailed the Arab League announcement as "a very big step forward."

However, any peace moves will have to confront the fractured Palestinian political landscape with Abbas holding sway over parts of the West Bank and Hamas firmly entrenched in Gaza. Repeated attempts by the two sides to secure a political reunification of the two territories have failed.