Prime Minister Sheikh Hamad bin Jassim al-Thani said Qatar, the only Gulf Arab state with ties to Israel, would ask the Jewish state to close its trade office in Doha and remove its staff until the situation improved.
In Nouakchott, Mauritania said it had frozen political and economic ties with Israel following the recall of its ambassador for consultations last week in protest at the Gaza offensive, but stopped short of a full severing of diplomatic ties.
The Doha meeting called on Arab countries to review their ties with Israel over the offensive that has killed more than 1,100 Palestinians and to suspend the Arab peace initiative.
The 2002 Arab initiative offered Israel normal relations in return for full withdrawal from all Arab land and a just solution to the issue of Palestinian refugees.
Syrian President Bashar Assad, whose country has been engaged in indirect peace talks with Israel, said the Arab peace initiative was "dead" and urged Arab states to end all "direct and indirect" ties with the Jewish state.
"I consider the Arab initiative with Israel "dead," he said.
Khaled Mashaal, Hamas' Damascus-based leader, told the opening session of an emergency conference on Gaza his group would not accept Israeli conditions for a truce and would fight on until the offensive ended.
"Despite all the destruction in Gaza, I assure you: we will not accept Israel's conditions for a cease-fire," Mashaal said.
The Qatar conference clashed with a meeting of Arab foreign ministers in Kuwait that also discussed the offensive, which has exposed deep splits in the Arab world.
The foreign ministers drafted a set of resolutions including the creation of a $2 billion (1 billion pound) fund to rebuild Gaza, a pledge of support for the Palestinian Authority, and backing for Egyptian efforts to mediate a ceasefire in Gaza in line with a UN Security Council resolution on the issue.
Qatar had proposed hosting a special Arab summit on Gaza, but regional powers Egypt and Saudi Arabia said they preferred to discuss Gaza at a planned economic summit in Kuwait on Monday, where they will discuss the Arab ministers' resolutions.
Qatar failed to secure the quorum of 15 needed for a formal Arab League summit but went ahead with a consultative meeting including senior non-Arab participants.
Calls at the opening session were among the strongest yet for Muslim and Arab leaders to take action to punish Israel for civilian suffering that has provoked global demonstrations.
Adding to the confusion, Saudi Arabia called a summit of Gulf Arab leaders on Gaza late on Thursday, in an apparent bid to pre-empt Qatar's diplomatic efforts.
"The Arab situation has been very chaotic," Arab League chief Amr Moussa said after the Kuwait meeting. "The region is very heated due to Israel's assault and the weakness and divisions in the Arab position and the Palestinian position."
Qatari Sheikh Hamad bin Khalifa al-Thani pledged $250 million to rebuild Gaza as part of another Gaza aid fund endorsed by the Doha meeting.
The flurry of rival Arab meetings reflects the Arab divide between Egypt, Saudi Arabia and their allies on one side, and Syria, Qatar and their allies on the other.
Qatar, which recently patched up once-frosty ties with its Saudi neighbour, and Syria are more sympathetic to Hamas, which won a 2006 election and has ruled Gaza since 2007 after routing fighters from Palestinian President Mahmoud Abbas' Fatah group.
Egypt, Gaza's only Arab neighbor, said it will not open the border for normal traffic without the presence of Abbas' forces. It has faced criticism for cooperating with Israel's blockade.
With bloody images of Palestinian casualties plastered across Arab television screens for the past 21 days, public demands have grown for Arab leaders to take a stronger stand.
Conservative Arab governments are wary of summits at times of crisis because they are reluctant to pass resolutions strong enough to satisfy public opinion.
Saudi Foreign Minister Prince Saud al-Faisal called at a news conference in Kuwait for an immediate cease-fire and a return to the UN Security Council.
Kuwait had scheduled the foreign ministers' meeting before Israel began the Gaza offensive, but Qatar felt the severity of the situation required an earlier meeting at leaders' level.