Exit polls indicated Wednesday night that the secular ruling Fatah Party would retain control of the 132-seat Palestinian Legislative Council, but that power would be shared for the first time with members of Hamas, the Islamist terrorist group.

Fatah took 46.4 percent of the vote, or 63 seats, in the first Palestinian parliamentary elections in a decade, while Hamas took 39.5 percent, or 58 seats, according to a Bir Zeit University exit poll.

The numbers seemed to indicate voters were frustrated with one-party rule under Fatah, which has been beset with corruption and a shattered economy. An earlier exit poll found Fatah leading Hamas 42 to 34 percent, and another said the results were 43-32 in favor of Fatah.

Hamas had run on an anti-corruption campaign, calling its party Reform and Change.

"We've reached the worst. The most important thing now is change," said Raed Abu Hamam, 35, a construction worker in Gaza's Beach camp who said he has lost faith in Fatah.

Smaller parties received 11 seats, according to the poll of 8,000 voters in 232 polling stations. The poll had a one-seat margin of error.

Preliminary results were expected late Wednesday or early Thursday. Complete results were expected by late Thursday.

The results forecast a stunning transformation in Palestinian politics and spell trouble for peace negotiations with Israel, itself dealing with potentially groundshaking changes as its leader, Ariel Sharon, lies in a coma after suffering a massive stroke exactly three weeks ago.

President Bush said Washington would stick to its policy of not negotiating with terrorists until Hamas renounces its charter calling for the destruction of Israel.

"A political party, in order to be viable, is one that professes peace, in my judgment, in order that it will keep the peace," Bush told the Wall Streeet Journal.

"And so you're getting a sense of how I'm going to deal with Hamas if they end up in positions of responsibility. And the answer is: not until you renounce your desire to destroy Israel will we deal with you."

Israel also said it would not deal with Hamas until it disarms. Acting Prime Minister Ehud Olmert has said that if a solution to the conflict cannot be reached through peace talks, then Israel will take more unilateral steps like its Gaza withdrawal.

"Anyone who participates in this government must renounce terrorism, must abandon the path of terrorism, must abandon incitement and the culture of hatred [and] must disarm the terrorist groups," Israeli government spokesman Raanan Gissin said.

Fatah is by no means free of terrorism, either; its radical wing, Al Aqsa Martyrs Brigade, has also carried out deadly attacks against Israeli civilians.

Preliminary results indicate Hamas members will have a role in the ruling coalition due to alliances with independents. Hamas leaders said they would not comment until official results are announced.

Thousands of Palestinians turned out earlier in the day to decide whether to vote for Fatah, which has controlled their government for a dozen years, or give Hamas a chance to rule for the first time.

Voter turnout was 77.7 percent of 1.3 million eligible voters, the Central Election Commission said. In the 1996 parliamentary election, turnout was about 75 percent. In the 1996 parliamentary election, turnout was about 75 percent.

In Gaza City, Fatah loyalists fired rifles out of car windows, sounded their horns and waved the yellow flag of their movement as they drove around the streets after getting word of the exit polls.

"Even though this is not the official result, we have to celebrate," said 22-year-old Omar Abdel Al Raouf, waving an assault rifle from his car window. "The winner is the Palestinian people."

"Whoever is the winner, it's a great victory for the Palestinians in general because partnership starts from this minute," said Samer Lulu, 29, a merchant who voted in Gaza City.

While not pleased with Hamas' emergence as a political power in the region, the White House called the vote "a historic and significant day for the Palestinian people."

Polls closed on Wednesday after 12 hours of voting at 7 p.m. (12 p.m. EST). Under a compromise with Israel, some Arabs in east Jerusalem were allowed to cast absentee ballots at post offices in the disputed city, and voting was extended there by two hours because postal workers were slow.

Fatah supporters across Gaza and the West Bank spent Wednesday evening honking car horns, shooting in the air and setting off fireworks in celebration.

Election officials began counting the votes soon after polls closed. Routine power cuts in the Gaza Strip town of Khan Younis forced election workers to count ballots by candlelight.

Wednesday's results could tip the balance of Palestinian Authority President Mahmoud Abbas' Cabinet. Also head of the Fatah Party, Abbas resisted pressure to postpone the vote when it became clear Hamas was a real political threat.

Many Fatah voters said they were grudgingly supporting the party out of old loyalties.

"The Palestinian Authority did nothing for us. People here have no jobs, while people in the PA got millions of dollars," said Ali Taha, 35, a laborer in the Amari refugee camp in Ramallah, who voted for Fatah anyway.

Hamas has executed numerous terrorist attacks against Israeli civilians and counts tens of thousands of Palestinian supporters and sympathizers. The group was participating in elections for the first time, presenting new challenges for Fatah, which was founded by iconic Palestinian leader Yasser Arafat and has long enjoyed a political monopoly in the region.

For the sake of Palestinians, who long to achieve statehood, Hamas will have to transform itself from a band of lawbreakers to a party of lawmakers, one leader said.

"They will start seeing things from a different perspective, and that will then advise them to take different positions and make different policies in order for them to take their responsibility seriously," Palestinian Foreign Minister Nasser al-Kidwa told FOX News.

Both parties have said they would consider a coalition if no clear victor emerges. Abbas also has vowed to continue peace negotiations with Israel no matter the outcome of Wednesday's vote.

"We are coming into a new phase. In this phase, we are calling for the international community to help us return to the negotiating table with the Israelis, conclude the peace process and implement it," Abbas said after the voting ended.

Thirty-one prisoners, include Marwhan Barghouti, a Fatah leader serving five life sentences for his role in the murders of Israelis, are among the candidates for the 132 open seats. None have been permitted to campaign or vote, all are housed in Israeli prisons, but they are expected to do well in the polls.

Activists from both parties were out in full force, handing out lists of candidates' names, baseball hats and scarves. But the Hamas effort appeared more organized than Fatah's.

"These elections will determine the fate of the Palestinian people," said Mohammed Shaabein, a 71-year-old retiree in the northern Gaza town of Beit Lahiya.

Fatah, tainted by corruption after 12 years in power, was asking voters for another chance to pursue an elusive peace deal with Israel. Hamas has focused on clean government, and criticized Fatah's attempt at compromise with Israel as a sign of weakness.

The Beach refugee camp near Gaza City was decorated in a sea of flags — green for Hamas, yellow for Fatah — and the excitement in the air was palpable.

Outside a polling station at a boys' school in the camp, Fatah supporters wore the party's black-and-white checkered scarves decorated with Palestinian flags.

Hamas activists sported green baseball hats, and many of the Hamas women wore full veils and gloves, once a rare sight in Gaza and a sign of the growing influence of fundamentalist Islam in the impoverished coastal strip.

"We've reached the worst. The most important thing now is change," said Raed Abu Hamam, a 35-year-old construction worker in the Beach camp who said he is voting for Hamas.

Polling places were mostly calm amid increased security, and voters exited brandishing inked-stained fingers meant to prevent fraud but that have also come to symbolize democratic gains in the Middle East.

Some 13,500 police officers deployed at 1,008 polling stations, taking up positions on rooftops and at entrances to enforce a weapons ban. In the West Bank's Balata refugee camp, militants who had threatened to burn down polling stations checked their assault rifles at the door with a flourish and peacefully voted.

However, police in the southern Gaza town of Khan Younis fired into the air to push back a crowd of impatient voters and a phalanx of Israeli police prevented hard-line Israeli lawmakers and extremists from forcing their way into a polling station in east Jerusalem.

"I think that Palestinians should be hailed for the democracy they exercised which is unprecedented in the Arab world, and tomorrow will be a new day for Palestinian political life," chief Palestinian negotiator Saeb Erekat said.

Nearly 20,000 local observers and 950 international monitors, led by former President Jimmy Carter, watched the vote.

"Both the Palestinian elections in the past have been very good. They have been honest, fair and free of violence and I hope and believe we will have the same thing today," said Carter, who monitored voting in disputed east Jerusalem.

Francis Wurtz, an observer from the European Parliament, said he had witnessed no irregularities.

"The organization is very correct everywhere," he said.

There were some allegations of fraud in the 1996 parliamentary election and the 2005 presidential election that brought Abbas to power, but international monitors said at the time the problems were not widespread.

Hamas' success has alarmed Israel and the West, although Abbas has argued that bringing them into the system will tame them, enabling peace moves to go forward. In an apparent sign of pragmatism, Hamas has not carried out a suicide attack since a cease-fire was declared a year ago.

Abbas, who voted in Ramallah, said elections were proceeding smoothly but complained of Israeli travel restrictions on roads. Israel said it was easing checkpoints on voting day.

"We are so happy with this election festival," Abbas said, after dipping his index finger in ink to prevent double voting.

Hamas spokesman Mushir al-Masri, seeking a seat in Beit Lahiya, said he expects the group to win the biggest bloc in parliament.

Even then, Hamas has said it doesn't want to rule alone. "We did not come to replace anyone or squeeze out anyone. We came to start a new phase in political partnership and unity," al-Masri said.

Under Palestinian law, the largest party would be asked to form a government.

Palestinian Prime Minister Ahmed Qureia said Fatah is ready to "stand behind" Hamas if the Islamic movement wins.

The election marked the first time Palestinians have a clear choice between two political camps since Hamas boycotted the 1996 vote.

Abbas, elected a year ago, will still head the Palestinian Authority regardless of Wednesday's results, but Israel says it will not deal with Hamas until it disarms, no matter the vote outcome.

Hamas' top parliamentary candidate, Ismail Haniyeh, said the group had no intention of laying down its arms after the elections as Abbas has said he expects. And another prominent candidate, Mahmoud Zahar, said his group is "not going to change a single word" in its covenant calling for Israel's destruction.

The Bush administration lists Hamas as a terrorist organization and also refuses to deal directly with it. But State Department spokesman Sean McCormack on Tuesday would not rule out negotiations with a Palestinian government that includes Hamas ministers.

Hamas is expected to ask for service ministries — health, education and welfare — and to leave diplomacy, including contacts with Israel, to others. Hamas, which has long ruled out negotiations with Israel, has signaled some flexibility on the issue in recent days.

If forced to form a coalition, Fatah said it prefers to govern with smaller parties and would invite Hamas only if left with no other choice.

FOX News' Jennifer Griffin and Mike Tobin and The Associated Press contributed to this report.