The rival Hamas and Fatah movements wrapped up months of tortuous coalition talks on Wednesday, saying they would present a national unity government to parliament for approval this weekend.
Both sides hope the alliance will end bloody internal fighting and lead the Palestinians out of international isolation, following a yearlong boycott of the outgoing Hamas-led government. Israel and Western countries have reacted coolly to the deal, but say they are waiting for final details before deciding whether to lift the embargo.
"Today is an occasion to celebrate. We have done everything," Prime Minister Ismail Haniyeh declared after a late-night meeting with President Mahmoud Abbas of Fatah.
Haniyeh and Abbas agreed to the power-sharing deal last month in Saudi Arabia, but had spent the past few weeks ironing out the final details. Clearing the final obstacle, the men agreed on the appointment of a new interior minister, a sensitive post that oversees several powerful security forces.
Officials, however, refused to give the name of the minister. But state-run Palestinian media identified him as Hani Kawasmi, a senior Interior Ministry official with good relations with Hamas and Fatah.
Haniyeh said he would announce the names of the new Cabinet on Thursday, and present the government to parliament for a vote of confidence on Saturday. In all, Hamas will get nine Cabinet posts and Fatah will get six.
Nabil Abu Rdeneh, a top aide to Abbas, urged the international community to give the government a chance, despite misgivings about Hamas. Israel, the U.S, and European Union consider the Islamic militant group, which has killed scored of Israelis in suicide bombings, a terrorist group.
"There will be a new Palestinian government and we call on all parties, including the Arabs, to work and live with this government, and to give it an opportunity," he said.
Hamas trounced the more moderate Fatah in parliamentary elections last year, giving it control over most government functions. But the Hamas-led government was crippled by Western sanctions imposed over its refusal to recognize Israel's right to exist.
Abbas, who was elected separately in 2005, has been pushing Hamas since last autumn to join Fatah in a more moderate coalition in hopes of lifting the Western boycott. The negotiations collapsed repeatedly, often sparking rounds of deadly factional fighting in Gaza.
As negotiations continued, there was an exchange of fire between Hamas and Fatah forces in the northern Gaza Strip. Security officials said nine people, including five bystanders, were slightly wounded in the shootout. More than 130 people have died in the infighting since last May.
Fears of further bloodshed led Abbas to agree to the power-sharing deal at talks in Saudi Arabia last month, even though the agreement falls short of the international demands to renounce violence, recognize Israel and accept past peace agreements.
Abbas has told Western powers that the deal — which includes a vague pledge to "respect" past agreements with Israel — is the best he could get from the militant group.
The Palestinian factions were eager to complete the coalition talks ahead of an Arab summit later this month in Saudi Arabia, where they hope to win wider recognition and funding for their new government.
Also, U.S. Secretary of State Condoleezza Rice is expected in the region at the end of next week as part of a push to restart peace efforts.
While the names of the ministers have not been published, several key appointments were announced at the conclusion of the talks in Saudi Arabia. They include Salam Fayyad, an internationally respected economist, as finance minister, and Ziad Abu Amr, an independent lawmaker, as foreign minister. Haniyeh will remain as prime minister.
Fatah officials said earlier that the party's parliament faction chief, Azzam al-Ahmed, has been chosen as deputy prime minister. But there was no confirmation on the appointment.
Israel maintained its wait-and-see approach to the emerging Palestinian government. Prime Minister Ehud Olmert has warned he will not work with the government if Hamas does not soften its position toward Israel.
"We expect the new Palestinian government to accept all three of the international principles," Israeli government spokeswoman Miri Eisin said.
Israel also expects to see an Israeli soldier captured in June by Hamas-affiliated militants freed before the new government convenes, Eisin said. Egyptian mediators have been trying to negotiate a prisoner exchange.
Hamad said there are "concerted efforts" to win the soldier's release but said a deal wasn't imminent. "I don't think he'll be released before a government is formed, but we hope it will be resolved soon," he said.