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.

"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.