Palestinian Prime Minister Ahmed Qurei has withdrawn his resignation after a meeting with leader Yasser Arafat.
Qurei (r) said he hoped the two men could now work together
The move ends a two-week deadlock after a dispute over who controls Palestinian security and intelligence forces.
Gaza saw a wave of Palestinian fighting and kidnaps as factions of Mr Arafat's Fatah movement vied for control.
Cabinet ministers who attended the talks say Mr Arafat has agreed to hand over the police forces to Mr Qurei who tendered his resignation 10 days ago.
However correspondents note that this is a promise that has been made before and never implemented.
The more powerful Palestinian security bodies, the intelligence and national security services, remain firmly under Mr Arafat's control.
Mr Qurei told a news conference in the West Bank town of Ramallah he would comply with Mr Arafat's wishes for him not to leave his post.
"President Arafat demonstrated his confidence in me by rejecting
my resignation. I value this confidence that he has placed in me and
I will therefore continue in my role," he said.
"I hope that we can now work together,"
Mr Arafat and Mr Qurei came out of the meeting with their hands held up together.
Protests began when Mr Arafat nominated a close relative, Moussa Arafat, as head of the Palestinian security services. Opponents demanded that Mr Arafat reform the security services and eradicate cronyism.
The unrest, between younger militiamen favouring sweeping reforms and the old guard of Arafat loyalists, led to a spate of gun battles and kidnappings of local officials including Gaza's police chief. A state of emergency was declared.
The instability prompted Mr Qurei to submit his resignation but it was rejected by Mr Arafat.