The Islamic militant group Hamas, which seized the Gaza Strip from Abbas in 2007, is considered a terror group by Israel and the West.
The unity government is to consist of technocrats backed by both sides and will prepare for general elections in 2015. Establishing such a government would be the most significant step in seven years toward ending the crippling Palestinian political split.
"The announcement of the government will be on Monday," he said during a meeting with several dozen pro-Palestinian activists from France. "The Israelis informed us today that they are going to boycott us immediately after we form the government."
Abbas said that "we are going to react to any Israeli action." He did not elaborate.
A senior Israeli government official said the formation of a unity government "is a great leap backward," but declined to say whether Israel would take punitive action. He spoke on condition of anonymity because he was not authorized to discuss the issue with journalists.