Israel and the United States have reacted with caution to an agreement by Palestinian factions Fatah and Hamas to form a national unity government.
There were rapturous scenes in the Gaza Strip following the deal
Israel said any new government must reject terror, recognise Israel and honour past accords, but did not make clear if it was satisfied by the deal.
The US said it would wait for the final document before making its assessment.
It is hoped that the deal brokered in Mecca will end weeks of factional unrest in the West Bank and Gaza Strip.
There were jubilant scenes in the Gaza Strip, which suffered the worst of the recent violence, as people took to the streets to cheer the signing of the deal.
People in cars waved the flags of both Hamas and Fatah, while some set off fireworks and celebratory gunfire.
AGREEMENT KEY POINTS
Ismail Haniya of Hamas remains PM
Key interior, finance and foreign ministries to be run by independents
Reports say Hamas to take nine cabinet posts, Fatah six and one each to four other parties
No explicit recognition of Israel
Palestinians hope that as well as bringing a halt to the fighting, the deal will bring an end to a year-long international embargo against the Hamas government, but the BBC's Jon Leyne in Gaza says that is by no means certain.
Hamas has rejected pressure from donor countries to recognise Israel and under this new deal that position has not been forced to change.
The fact that it is not included in the new agreement, named the "Mecca Declaration", explains the muted response from the US and Israel, our correspondent says.
No Israeli thaw
Israeli government spokeswoman Miri Eisin said the conditions for an end to the freeze had not changed.
"Israel expects a new Palestinian government to respect and accept all three of the international community principles - recognition of Israel, acceptance of all former agreements and renunciation of all terror and violence," she told the Associated Press news agency.
The US state department thanked King Abdullah of Saudi Arabia for brokering the deal, but stopped short of welcoming it.
A spokesman told the BBC that Washington remained committed to President George W Bush's vision of two democratic states - Israel and Palestine - living side by side, and that the Palestinian people deserved a government that could pursue that goal.
Palestinian Authority President Mahmoud Abbas and exiled Hamas political chief Khaled Meshaal signed the accord after talks in the Saudi city of Mecca.
They have agreed a share-out of government posts, with independents taking the key jobs of finance, foreign affairs and the interior.
AFP news agency, citing a copy of the agreement, said Hamas would fill nine posts, six would go to Fatah and one each to four other parties in parliament.
Hamas Prime Minister Ismail Haniya will retain his position.
As the two leaders signed the accord at a ceremony in Mecca, Mr Meshaal called for violence to stop immediately, describing the factional fighting and unrest in the Palestinian territories as "dark days".
The deal follows months of faltering talks between the two sides
"It is our turn to make this agreement work and to make this agreement stick, to build our Palestinian house on strong foundations," he said.
He said the international community "must respect our accord, recognise our Palestinian reality and deal with it seriously".
Mr Abbas urged the new government to "respect" previous accords signed between the Palestinians and Israel.
Hamas and Fatah have been locked in a bitter power struggle since Hamas defeated Fatah in elections in January 2006.
Months of violence between Fatah and Hamas supporters left scores dead and Palestinian civilians frightened to venture on to the streets.