Hamas has insisted on the departure of Salam Fayyad, the Palestinian prime minister favoured by Israel and the west, under a deal agreed with its rival faction Fatah for a unity government, according to sources in Gaza.

The Islamist organisation also said it would keep control of the Gaza Strip under the accord, which is expected to be formally signed by leaders of the two factions in Cairo next week.

The plan drew further criticism on Thursday from Israel, which has said it would not deal with a Palestinian government that included members of Hamas.

However, the interim Hamas-Fatah government will have no involvement in negotiations with Israel. Talks will still be conducted by the Palestinian Liberation Organisation, headed by Palestinian president Mahmoud Abbas.

Abbas said a caretaker government would feature technocrats and exclude Hamas members. "The people will be independents, technocrats, not affiliated with any factions," he said. He said it was "too early to tell" whether Fayyad, an independent and non-elected prime minister, would continue in post. Under the reconciliation deal, presidential and legislative elections will be held next year.

Egypt said it would send a security team to Gaza. "An Egyptian security delegation will head to Gaza to help settle and organise the internal security situation there, now that the reconciliation agreement is finally in place," an Egyptian security source told Reuters.

Egyptian negotiators, who brokered the deal in a series of secret meetings, persuaded Hamas to accept a non-political cabinet, which will not deter foreign donors, and convinced Fatah to allow Hamas to maintain its security control of Gaza, sources told the Guardian.

But Hamas insisted on the removal of Fayyad as prime minister. Although his stewardship of the Palestinian Authority and success in reforming its institutions has been praised by the international community, Fayyad is seen as anti-Hamas and his continued premiership would seem like a defeat for the Islamist faction.

Abbas will appoint the new prime minister. The most popular candidate is Munib al Masri, a US-educated businessman respected by both factions.

Meanwhile, Israeli leaders continued to criticise the agreement. President Shimon Peres called it a "fatal mistake that will prevent the establishment of a Palestinian state and will sabotage chances of peace and stability in the region … the world cannot support the establishment of a state that part of its regime is a terror organisation".

Israel's hardline foreign minister, Avigdor Lieberman, told the Army Radio station: "Hundreds of terrorists will flood the West Bank and therefore we need to prepare for a different situation."

The opposition leader, Tzipi Livni, urged the international community to put pressure on the Palestinians to ensure the new government renounced violence and recognised Israel's right to exist.

The two factions were persuaded by "friends in the Arab World and the European Union that it was time to finish the split", said Faisal Abu Shahla, a Fatah legislator in the Gaza Strip.

But some expressed scepticism about the extent of reconciliation. Mkhaimar Abusada, a professor of political science at al-Azhar University in Gaza, described the agreement as "a very vague format which will allow Palestinians to speak with one voice but, at a practical level, there will remain two separate entities in the West Bank and Gaza in terms of security.

"Hamas will be able to maintain its militias and its rhetoric of resistance to Israel. There will not be many changes on the ground. Each one will be in charge of their territory," he said.

Hamas officials indicated that the organisation understood the unity agreement could be jeopardised by any militant operations.

"We have to be careful of how we respond to Israel because they will do everything to dismantle the agreement," said Ghazi Hamed, Hamas's deputy foreign minister. "It is clear that Israel does not like us. They want to divide us because it gives them more power. I expect they will try to provoke us and create chaos to put pressure on Mahmoud Abbas.

All sides admit that the agreement is the first step of a complicated process. Hamed said:

" The challenge will be to implement the agreement. If we succeed in choosing a strong PM and a strong minister of interior, we stand a better chance of success."

Abu Shahla said one consequence of the agreement would be that Fatah would be able to operate openly in Gaza for the first time since 2007 and Hamas would be able to do the same in the West Bank.

Following the signing of the deal, Abbas may make his first visit to Gaza in more than four years.