"Israel cannot have stability with occupation. It has to choose. This is the message Israel should understand," he told Reuters in an interview in Abu Dhabi.
"Armed resistance is legitimate. All resistance options are open to the Palestinian people and Palestinian factions including Hamas," said Meshaal, who is touring Arab and Muslim countries to solicit financial and political support.
He said that he informed Arab leaders that the government his group will head needs $1.75 billion per year to make ends meet and that he was confident that they would help.
Israel says it will not negotiate with a government led by Hamas, which is sworn to destroy the Jewish state and has carried out nearly 60 suicide bombings against Israelis since a Palestinian uprising erupted in 2000.
Since its victory in Palestinian elections in January, Hamas has been under pressure from the United States, the European Union and Israel to give up violence and recognize Israel or lose crucial financial aid to the Palestinian Authority.
"So long as there is an Israeli occupation in Palestine and so long as U.S. policy is biased, the so-called terrorism that the United States fears will escalate because the mistakes of U.S. foreign policy are pouring oil on fire," Meshaal said.
He said his message to U.S. President George W. Bush was "that he should not worsen his mistakes."
Meshaal said Middle East peace required Washington to adopt an "even-handed policy that maintains the same distance from all sides" involved in the conflict.
He said Hamas would reject international pressure to recognize Israel until Israel was compelled to change its position on Palestinian rights.
"It is illogical for the victim to be pressed to recognize its murderer and occupier," Meshaal said. "What is required is a fundamental change in the Israeli position."
Meshaal said he had secured pledges for financial support during his tour and that Arab countries would agree to beef up allocations to Palestinians in a summit in Sudan next week.
"I believe that the Arab countries will agree in the Khartoum summit the level of (financial) aid they will offer the Palestinian people," he said.
"So far there has been good commitment that needs to be translated into figures... I am sure that Arab and Islamic support will cover a large part of the Palestinians' needs. No matter what Israel does and how much pressure the United States applies, I do not think Arabs and Muslims will cave."
Iran has said it will meet any gap in official funding for a new government once it is formed by Hamas in coming weeks.
But Meshaal said the Palestinian people could face a "catastrophe" if fellow Arabs did not also chip in.
Israel has already cut off monthly payments of tax revenues it collects on behalf of the Palestinian Authority.
Meshaal said Hamas would not be bowed by the pressure.
"We are not isolated. We are a movement that enjoys the confidence of its people and has the capability to meet all its obligations," he said. "We have succeeded in the past and we will succeed in the present and the future, God willing. Those who bet that we will lose are deluded."