Palestinian President Mahmoud Abbas of Fatah and Hamas leader Khaled Mashaal signed the agreement Thursday in front of Saudi King Abdullah. The king hosted reconciliation talks between the two sides in Mecca.
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An Abbas aide said the Palestinian president called on the new government to abide by international law and past agreements reached by the Palestine Liberation Organization, whose largest faction is Fatah.
It was not immediately clear whether the agreement would be enough to convince international donors to restore aid. Donors suspended aid after Hamas took power last year because of the group's refusal to renounce violence, recognize Israel, and respect past agreements with the Jewish state.
The reconciliation talks began Wednesday, and today the parties agreed on how to divide cabinet posts. Mr. Abbas has asked current Prime Minister Ismail Haniyeh of Hamas to head the new government.
Fighting between Hamas and Fatah has killed more than 90 Palestinians since December.
Fatah and Hamas have been locked in a power struggle since parliamentary elections in the West Bank and Gaza Strip brought Hamas to power last year.
Some information for this report was provided by AFP, AP and Reuters.