The rival Palestinian factions Hamas and Fatah will meet in Cairo on Sunday for the first time in more than a year in an Egyptian-led effort to agree a unified government and end their divisions.

Egyptian officials have prepared an outline deal that would include a "national reconciliation government", but it is short on details and could take weeks of negotiation. The last effort at a unity government, arranged by the Saudis in February 2007, collapsed and the factions reverted to a near civil war until Hamas seized full control of Gaza months later.

"This will probably be the last opportunity for Fatah and Hamas to put aside their differences and put an end to division and launch a comprehensive national dialogue," said Mkhaimar Abu Sada, a political scientist at Gaza's
al-Azhar University.

The talks will centre on establishing a government with the goal of ending the economic siege of Gaza, reforming the security forces under a national leadership and preparing for fresh presidential and parliamentary elections.

A united government would present a challenge and perhaps an opportunity for fresh policymaking for the US and Europe, which refused to talk to Hamas and isolated the movement soon after it won Palestinian elections in 2006. Since then Hamas-run Gaza has been under economic blockade. Israel limits most imports and has banned all exports. Egypt has also kept its one crossing mostly closed.

Israel is not likely to deal with any government with a Hamas component unless it offers recognition of Israel, a halt to violence and acceptance of past peace deals - something Hamas has consistently refused. Fatah also wants to secure an endorsement for Mahmoud Abbas, the Fatah leader and Palestinian president, to continue in office for another year after his term formally ends on January 8. If Hamas refuses it will probably challenge Abbas's legitimacy and may appoint its own president in Gaza.

Hamas wants an end to Gaza's blockade and is demanding entry into and reform of the Palestine Liberation Organisation, the umbrella group regarded as the "sole legitimate representative of the Palestinian people". All peace talks with Israel are carried out by Abbas as PLO leader and it was the PLO which in 1993 formally recognised Israel's right to exist as part of the Oslo process. Hamas's entry into the PLO has been discussed but never agreed. It is on the agenda in Cairo but the Islamist movement is pushing hard for a deal.

"The PLO is representing the Palestinian people and its political programme should be discussed among all the political factions and represent all the authorities," said Taher al-Nunu, a Hamas spokesman in Gaza.

Many Palestinians believe there was pressure from the US on Abbas not to deal with Hamas but after the election that may now be waning. Yet Abbas's failure in the past year to secure a peace agreement has weakened his position. "Many people didn't think Hamas was going to last as long as it did," said Abu Sada. "But ... instead of being squeezed it has got much stronger and imposed order in Gaza."

"People are fed up with both of them," said Ali Jarbawi, professor of political science at Birzeit University in Ramallah. "They are fighting over power in an authority still under occupation."