Internal power struggles among Palestinians are jeopardising the dream of an independent state, Palestinian leader Mahmoud Abbas has said.
There have been clashes between rival security forces
He spoke as his Fatah group held talks with the largest Palestinian faction, Hamas, to try to heal divisions.
Prime Minister Ismail Haniya, of Hamas, addressed the meeting to appeal for unity, vowing tension on the streets would not descend into civil war.
The groups have struggled for power since Hamas won elections in January.
There have been violent clashes between supporters loyal to the groups.
Tensions have been exacerbated by a foreign aid freeze by donors refusing to finance a government led by Hamas, whom they have branded a terror group.
Speaking in the West Bank town of Ramallah, Mr Abbas, who chairs Fatah and is president of the Palestinian Authority, called for a new understanding between the two groups.
"This crisis, everyone is feeling the danger. Our national plan is in jeopardy," he said.
"How can we resort to internal struggle while we are committed in our battle against the siege, the wall [Israel's separation barrier] and settlements?"
ECONOMY IN CRISIS
World Bank says economy will shrink by 27% in 2006, 74% will be below the poverty line and 47% unemployed by 2008
$116m: PA's monthly wage bill
PA employs 165,000, but has not paid wages since March
25% of people in West Bank and Gaza depend on PA wages
Mr Haniya - forced by Israeli travel restrictions to address the meeting via videophone from Gaza City - vowed that Palestinian violence would not descend into civil war.
"Civil war is not in our vocabulary. Our people have no experience of civil war, therefore there will never be civil war," he said.
Tensions between Hamas and the Fatah-dominated police have led to a string of incidents in which at least nine people have been killed this month.
The deployment by Hamas of its own security forces in Gaza in the last week has raised tensions further.
Olmert in the US
Israeli Prime Minister Ehud Olmert, who is continuing a visit to the US, has said he is ready to negotiate peace with the Palestinians but not until Hamas rejects violence and recognises Israel.
Mr Olmert warned that Israel would not wait forever and that he will redraw Israel's borders unilaterally if necessary.
"Should the Palestinians ignore our outstretched hand for peace, Israel will seek other alternatives to promote our future, and the prospects of hope in the Middle East," he said.
The Hamas-run government and the Fatah-controlled presidency are hopelessly divided on the Israel issue, the BBC's Alan Johnston in Gaza says.
On Wednesday, a Palestinian security chief in the Gaza Strip was killed by an explosion in his car. Nabil Hudhud was known to be loyal to Fatah. The cause of the blast was not clear.
Earlier in the day, masked gunmen killed a member of Hamas and wounded two others in Gaza City.
The Palestinian factions need to agree on many operational issues ranging from security to financing, correspondents say.
Western donors have suspended direct aid to the Palestinian government to pressure Hamas into renouncing violence and recognising Israel.
The move has plunged the Palestinian Authority into a financial crisis, unable to pay thousands of public workers.