Calling Hamas (search) an "enemy of peace," Powell also threw his support behind Israel, which has said a cease-fire alone is not sufficient for peace in the Middle East.
Powell was speaking at a joint news conference with Israeli Prime Minister Ariel Sharon (search), who said Palestinian security forces must squash the militant groups before any progress can be made on the so-called "road map" to peace.
The secretary of state later met with Palestinian Prime Minister Mahmoud Abbas (search), who is trying to wrestle a truce with Hamas and other armed groups and has said he will not use force against them for fear of triggering a civil war.
"None of this is easy," Powell said in a press conference after meeting with Abbas later in the day. "Both the Palestinians and the Israelis need to make difficult decisions. But now is a moment of opportunity and we must seize it … violence is not the way to build a state."
After meeting with Powell, Abbas demanded that Israel take steps to ease restrictions on Palestinians, stop settlement building and "change itself from an enemy into a partner."
"The logic of confrontation cannot match the logic of peace," Abbas said.
Powell said he and Abbas spoke mainly about security arrangements. Powell said he again stressed that Palestinian attacks must end. "Violence and terror is not the way to build a state," he said.
Powell said the Palestinians must go beyond a truce.
"The enemy of peace has been Hamas," Powell said during the earlier press conference, adding that as long as the group remains committed to terror and violence, "this is a problem we have to deal with in its entirety."
Hamas has killed hundreds of Israelis in shootings and bombings in recent years. It has said it does not accept the road map, launched at a Mideast summit two weeks ago by President Bush.
"We must make sure that all international pressure possible is brought to bear on these organizations, so that they know they will not succeed, they will not prevail, they will be dealt with," Powell said, referring to the Palestinian militias.
Hamas leader Abdel Aziz Rantisi (search) responded angrily, calling Powell a "big liar."
"This is a statement that reflects and proves that he is a little slave to the Zionists and to his master Sharon, that he is the real enemy of peace and justice in the world," he said.
Sharon said the Palestinians must realize that without a decisive war on terror, there will be no progress in peace talks.
"A true war on terrorism, on its infrastructure, on the entities that finance it, on those who initiate it and on the dispatchers, is the way to make way and move ahead in a sincere and genuine process," Sharon said.
Sharon and Abbas seem to be at odds as to how much time the Palestinian security forces should be given to get themselves organized.
Powell urged both sides to show patience, while Sharon said that once the Palestinians have accepted security responsibility in areas from which Israel withdraws, they will be held accountable for any attacks launched from those areas.
Peace negotiations so far don't seem to be doing much to stop the violence ravaging the region.
Twenty-seven Israelis have been killed in bombings and shootings since the Mideast summit on June 4. During the same period, 36 Palestinians have been killed in Israeli strikes, and four more died while carrying out attacks.
Even as the two leaders spoke, an Israeli motorist was killed in a Palestinian shooting attack in the West Bank, and three people were wounded. Two of the wounded were in serious condition.
"The pace and urgency of our work needs to be maintained in order to capitalize quickly and decisively on this moment that history has given to us," Powell said.
The two sides also are clashing over Israel's targeted killings of wanted Palestinians and the scope of Israel's withdrawal from Gaza. Both issues were discussed at a meeting between Israeli and Palestinian security officials and U.S. monitors Thursday.
Palestinians say that in order to persuade militant groups, particularly Hamas, to accept a cease-fire deal, Israel must guarantee targeted killings will be halted.
Sharon refuses to give such a blanket promise, saying he reserves the right to go after "ticking bombs." However, Sharon's aides have said this also applies to those planning attacks.
In trying to kill Rantisi in a missile strike last week, Israel referred to him as a ticking bomb. Rantisi, who was wounded in that strike, has insisted he has no ties to the military wing.
Rantisi said of Sharon's comments: "Such statements will not terrorize us and will not force us to stop our resistance to occupation."
Powell suggested Friday that a broad definition of a ticking bomb is unacceptable.
"When one goes beyond that and expands those kinds of activities (targeted killings) to individuals or situations where it might not be a ticking bomb, then ... the consequences of such actions and how they play into our broader efforts for peace must be taken into consideration, and that is the position that we have discussed with the Israelis on many occasions," he said.
Powell said Israel has begun carrying out one obligation under the peace plan -- the dismantling of West Bank settlement outposts, albeit with some resistance. "We have begun to execute the road map," Powell said.
Israel has to remove dozens of outposts. In recent days, it has dismantled 11, including an inhabited one, Mitzpeh Yitzhar. Hundreds of setters there brawled with about 1,000 Israeli troops. Thirty people were hurt and more than a dozen arrested.
Israel must also withdraw troops to positions held before the outbreak of fighting in September 2000, while the Palestinians must dismantle militant groups.
Powell said agreement has not yet been reached on the terms of an Israeli withdrawal from large parts of Gaza, but progress has been made. "The conversations are serious and the issues ... are being reduced in number, and the differences are being narrowed," Powell said.
One of the issues being debated is control over the main north-south road in Gaza.
Israel says roadblocks it erected along the road after the outbreak of fighting remain in place. The Palestinians insist the barriers, meant to protect Jewish settlers from attack by Palestinian militants, be removed so Gaza residents can see an actual improvement in their daily lives.
Palestinian motorists are often unable to get from one end of Gaza to the other, meaning they can't reach schools and jobs. Before September 2000, Israeli and Palestinian security forces jointly patrolled the road.
Abbas and Powell also discussed the role of the U.S. monitoring team that arrived earlier this week. The team is headed by John Wolf, a senior State Department official.
So far, Wolf has chaired two joint meetings with Israeli and Palestinian security officials. The team is to supervise implementation of the peace plan, but it remains unclear how much authority it has to make a ruling in a dispute.
The Associated Press contributed to this report.