Zahar arrived at the Rafah border crossing between Egypt and the Gaza Strip carrying four suitcases stuffed with $20 million, an official at the Palestinian Authority (PA) presidency said.
He declared the money to customs officials upon arrival at the terminal and in conjunction with President Mahmoud Abbas' office, the decision was taken to transfer the money to the finance ministry, the source said.
Zahar had on Wednesday been scheduled to hold talks with senior officials in Egypt en route back to Gaza after an extended overseas tour in which he has sought to drum up political and financial support for the Hamas government.
On Tuesday he was in Damascus where he met Syrian foreign minister Walid Muallem and on Saturday in Iran to meet Iranian counterpart Manouchehr Mottaki.
The source in Abbas' office said that the cash was in the president's Gaza City office and would be transferred to the finance ministry.
Hamas' chief spokesman Sami Abu Zuhri, who was last month caught trying to smuggle hundreds of thousands of euros into Gaza, said that Zahar's money would be handed over to the finance ministry and used to break the effects of the siege.
"We want to break the inhuman policy against the Palestinian people because we are making all efforts to bring in the money from the governments.
"The money that Dr. Zahar has brought in will form part of the government's efforts to break the siege," he said, unable to confirm the sums involved.
A spokesman for the EU monitors at the Rafah terminal could confirm only that Zahar had crossed the border, leaving behind various pieces of luggage that were being processed by the Palestinian presidential guard and customs.
"The minister of foreign affairs crossed the border 10 minutes ago. A convoy of four vehicles was waiting for him and he has jumped into one of the two vehicles, which has already departed," Julio de la Guardia said.
He said that the matter of his luggage was being dealt with by the presidential guard and customs officers given that the European border guard was only at Rafah to monitor procedures.
The PA has been teetering on the brink of bankruptcy ever since the European Union and United States suspended direct aid over the ruling Hamas movement's refusal to recognize Israel and renounce violence.
On May 19 Abu Zuhri was caught trying to smuggle €639,000 ($816,000) into Gaza at the Rafah terminal where the money was impounded by the Palestinian customs authorities.
At the time Abu Zuhri told reporters that the money, stuffed into a belt, was bequests from Palestinian expatriates to help the cash-squeezed local populace, which has been suffocated by Western aid cuts since Hamas took office.
The Hamas government has been facing fiscal meltdown since taking office in March and the vast majority of the 160,000 people on the PA payroll have not been paid since February owing to the EU and US aid cuts.
© 2006 Agence France-Presse