The Swiss foreign ministry fears Israel's decision to stop transferring vital funds to the Palestinian Authority (PA) will adversely affect civilians.
On Monday the United Nations special envoy in the Middle East also raised objections, saying the action was unhelpful and premature.
Switzerland has warned that the move could worsen the already deteriorating economic and social conditions faced by ordinary Palestinians in the occupied territories.
Tel Aviv announced that it was cutting off the payments at the weekend in its first official response to last month's election victory by Hamas.
The monthly transfer is worth about $50 million (SFr65.6 million) and consists mostly of custom and tax duties collected by the Israeli government on behalf of the PA. A substantial part goes towards paying the PA's 130,000 employees.
Switzerland, which is one of the few western governments to recognise Hamas as democratically elected, called on both sides to behave with restraint.
"Only a renunciation of violence, a willingness to engage in dialogue and full compliance with international humanitarian law can bring about progress in the search for a just and lasting solution of the conflict," said the foreign ministry in a statement.
Spokeswoman Carine Carey told swissinfo that Switzerland was ready to work together with the new Palestinian government, provided its action was based on dialogue and peaceful methods.
Furthermore, she pointed out that the Palestinian Authority should adhere to its obligations contained within the Oslo Accords, in particular recognising the state of Israel and the two-state solution.
The foreign ministry welcomed the formation of a new Palestinian parliament, in which Hamas will hold 74 of the 132 seats, and the naming of Ismail Haniyeh as the new prime minister.
Carey stressed that Bern would measure the new government by its deeds.
"We do not want to judge now and we expect them to respect the law and take into account the interests of the entire Palestinian population," she said.
Hamas is classified as a terrorist organisation by Israel, the European Union and the United States.
swissinfo, Faryal Mirza
Swiss involvement in Israel and the occupied territories primarily consists of development aid for the Palestinians.
This is routed through non-governmental and other international organisations. No direct funding is given to the Palestinian Authority, apart from a subsidy to the statistical office.
The Swiss foreign ministry commended the order and the good organisation of the January parliamentary elections.
A Swiss-backed peace plan unveiled two years ago – the Geneva Initiative – has so far failed to win political support on either side.
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