CAIRO - Palestinian rivals Fatah and Hamas on Wednesday signed a preliminary agreement on reconciliation during talks in Cairo, paving the way for forming an interim government to prepare for elections.

The Palestinian movements of Fatah and Hamas reached an agreement on all controversial issues including the elections and the formation of the interim government, Egypt's state MENA news agency quoted senior Egyptian officials as saying.

"We have agreed to form a government composed of independent figures that would start preparing for presidential and parliamentary elections," said Chairman of Fatah parliamentary bloc Azzam al-Ahmed, adding elections will be held within one year.

The interim government will be responsible for the internal issues while the interim committee for Palestinian fractions will deal with foreign affairs, Hamas leader Mahmoud Al-Zahar told Nile TV.

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"It is the time to gain the fruits of the negotiations and reach agreement between Fatah and Hamas," Moussa Abou Marzouq, deputy chairman of the political bureau of Hamas, said in a joint press conference of both parties' representatives.

"We have handled all the controversial remarks regarding the Egyptian proposal like the date of elections and the election committee, forming a government of independents, and resumption of the legislative council work," Marzouq added.

A source told Xinhua that Egypt will invite Palestinian National Authority (PNA) President Mahmoud Abbas, Hamas chief Khaled Mashaal and other Palestinian factions to Cairo within a week to sign the final agreement which aims at ending the political split between the Hamas-controlled Gaza Strip and the West Bank ruled by the Fatah-led PNA.

Al-Ahmed noted that there had been undeclared Egyptian efforts that helped the two sides reach the initial agreement.

Egypt has officially sponsored talks between the two factions who came to Egypt on Tuesday in a bid to unite all the Palestinian fractions.

Al-Ahmed stressed in the press conference that Israel exploited the division between both parties to avoid it's commitment regarding the peace agreements, and even the United States and the international community abandoned their duties towards the whole Palestine cause.

"The disunity among the Palestinians was the main reason for their weakness before the Israeli invasion, completing the segregate wall, judaizing Jerusalem and swallowing big part of the West Bank land," al-Ahmed said.

Israeli Prime Minister Benjamin Netanyahu asked the Palestinians to "choose either peace with Israel or peace with Hamas" after Fatah and Hamas reached the initial agreement.

While in the West Bank city of Ramallah, Netanyahu was rejected by the Palestinian leadership.

Netanyahu must choose between peace and the building of Jewish settlements in the occupied Palestinian territories, said Nabil Abu Rdineh, spokesman for Abbas, referring to the construction which caused the U.S.-brokered peace talks between Israel and the Palestinians to collapse last year.

The preliminary agreement is sought to end the long-running political split between Abbas' Fatah group and its bitter rival the Islamic Hamas movement.

Hamas routed pro-Abbas forces and took over the Gaza Strip in 2007, one year after it won parliamentary elections.

Egyptian ex-president Hosni Mubarak's government tried to bridge the inter-Palestinian split by sponsoring a reconciliation negotiation in 2009, but it failed to broker a deal between the two groups.

The agreement came after the stepping down of Mubarak, who was a strong supporter of Abbas and Fatah, and Egypt's new administration began to readjust its policy.

While some analysts said the main reason behind Hamas' approval of the agreement was not the resignation of Mubarak, which made Hamas even stronger and Fatah weaker.

Samir Gatas, head of Egypt's el-Maqdis Center for Political Studies, said that the situation in Syria was the main pressure behind Hamas' new stand since it couldn't seek support from Syria and Iran.