The Palestinian factions Fatah and Hamas have agreed to end a four-year rift in a surprise move that could have profound implications for the stalled Arab-Israeli peace process.
Fatah, the party dominant in the West Bank, and its Islamist rival Hamas, which governs Gaza, have reached a preliminary agreement to form an interim government within days and hold general elections within the year, Palestinian and Egyptian officials said.
"All points of differences have been overcome," said Taher al-Nono, a spokesman for Hamas in Gaza.
The Egypt-brokered unity deal, if it is signed, is likely to have huge significance for the peace process. While Palestinians have long viewed unity as critical to achieving an independent state, Israel said that it would reject any peace negotiations with a government that includes Hamas.
"The Palestinian Authority must choose between peace with Israel or peace with Hamas," said Prime Minister Benjamin Netanyahu. "There cannot be peace with both because Hamas strives to destroy the state of Israel.
"The idea of reconciliation with Hamas demonstrates the weakness of the Palestinian Authority and makes one wonder whether Hamas will seize control of Judea and Samaria the way it seized control of the Gaza Strip," the Prime Minister added, referring to the West Bank by its biblical name.
The United States, a key broker in the Middle East peace process, reacted cautiously to the news, saying that, if Hamas is to play a constructive role, it must first renounce violence, recognise Israel's right to exist and respect past agreements.
Since US-sponsored peace talks foundered last autumn, the Palestinian President Mahmoud Abbas has intensified his efforts to reach a unity deal ahead of plans to seek United Nations support in September for an independent state based on the 1967 borders. Last month, he said he was prepared to go to Gaza to meet with Hamas leaders to pave the way for elections.
Nevertheless, the speed of yesterday's agreement, which followed secret talks, took many by surprise, as previous talks had repeatedly broken down. The two sides did come close to an agreement in 2009 only for talks to founder at the eleventh hour.
The preliminary accord is still in its infancy, and many questions remain unanswered as to how the two factions will thrash out what are very profound areas of disagreement, including who will govern the security forces in the West Bank and Gaza and how to resolve the decades-long conflict with Israel.
Egypt will now invite all Palestinian factions to Cairo to sign a reconciliation agreement, officials said. The two factions have been estranged ever since Hamas unexpectedly won the 2006 elections, routing Fatah. Although the two formed a short-lived coalition government in 2007, it fell apart amid bloody fighting in Gaza. Hamas seized control of Gaza, while Mr Abbas formed his own government in the West Bank. The schism effectively split the two territories, a split that became more permanent when Israel imposed a blockade on Gaza.
Palestinians on the street lament the schism that has been one of the main obstacles to enduring peace in the Middle East, as any agreement with the Palestinian Authority in the West Bank would leave the issue of Hamas and Gaza unresolved.
As mass protests swept across the Middle East this spring, it has been unusually quiet in the Occupied Territories, not least because many people are unsure whether to protest against the Palestinian Authority or Hamas, or against the Israeli occupation.