In principle, elections could help end the deep political split between West Bank-based President Mahmoud Abbas and the Islamic militant Hamas, which rules the Gaza Strip, the other territory the Palestinians want for their state.
Hamas immediately ruled out participation, saying the vote was meant to divert attention from the scandal caused by the secret documents uncovered by the Al-Jazeera satellite channel last month.
Still, it could become difficult for Hamas to reject elections at a time of growing calls for democracy throughout the Middle East. Hamas itself has praised the downfall of Egyptian President Hosni Mubarak as a victory for the Egyptian people.
In a sign of the political damage caused by the leaks, chief Palestinian peace negotiator Saeb Erekat announced his resignation Saturday. Erekat has been widely vilified since Al-Jazeera, citing hundreds of internal documents, alleged last month that Palestinian negotiators secretly offered far-reaching concessions to Israel.
The call for elections came a day after Mubarak stepped down, forced out by mass protests against his ironfisted 30-year rule. The Egyptian uprising and another successful revolt in Tunisia a month earlier have inspired calls for democratic reform throughout the region.
Abbas aide Yasser Abed Rabbo said Saturday that preparations were under way for legislative and presidential elections later this year. "We call on parties to put aside all of their differences and to focus on conducting the elections by September at the latest," he told a news conference. He did not give a firm date for the vote.
The announcement appeared to be an act of desperation by an embattled government that has been weakened by the standstill in peace efforts with Israel, its rivalry with Hamas and the loss of its key Arab ally in Egypt. Mubarak had served as an important mediator between Israel and the Palestinians, and rallied Arab support for Abbas when needed.
Abbas is still feeling the aftershocks from Al-Jazeera's reports on "The Palestine Papers."
The documents showed that in 2008 Abbas agreed to major concessions toward Israel by dropping claims to parts of east Jerusalem, the hoped-for Palestinian capital, and acknowledging that most Palestinian refugees would never return to the lost properties in what is now Israel.
Erekat, known for his frequent appearances in both the English and Arabic media, said he resigned as chief negotiator because the documents were leaked by someone from his office.
With the call for elections, Abbas is trying to signal that he is attentive to his people's demands. By putting his job on the line, he can portray himself as a leader committed to democracy. It was not clear whether Abbas, who has said he would step down after his current term, would seek re-election.
But the move is a gamble.
With peace talks on hold, Abbas and his Fatah party will have no major accomplishment to present to voters.
And Hamas, which seized Gaza from Abbas' forces in 2007, said it would not participate in the elections. Fawzi Barhoum, a Hamas spokesman in Gaza, called the election "illegitimate."
"Hamas will not participate or recognize or give any cover for this election and we consider this announcement as a conspiracy against the Palestinian people," he said. Hamas, an Iranian-backed militant group, rejects peace with Israel.
The elections appeared to be part of a broader strategic shift by Abbas in recent months. Abbas has largely given up on a peace deal and as an alternative plans to seek international recognition of Palestinian independence.
September is shaping up to be an important month for the Palestinians.
At that time, Prime Minister Salam Fayyad expects to complete a two-year process of building the state from the ground up. The Palestinians have also signaled they will ask the U.N. Security Council, whose decisions are legally binding, to formally recognize an independent Palestine at that time.
Israeli officials have dismissed the Palestinian tactics, saying unilateral recognitions will not change the situation on the ground and that there is no replacement for direct negotiations.
However, Netanyahu's hardline government, already reluctant to making deep concessions to the Palestinians, appears unlikely to make any bold offers while the Egyptian situation remains fluid.
Associated Press writer Diaa Hadid in Jerusalem contributed to this report.