The rival Palestinian factions Fatah and Hamas have agreed to hold elections next May, a senior official said Tuesday, in what would be a major step toward ending a four-year rift.

Azzam al-Ahmad, a senior Fatah negotiator, said the sides agreed on the election plan in secret talks and are expected to formally approve it later this month. The plan calls for the establishment of a caretaker government to prepare for the vote — most likely without current Prime Minister Salam Fayyad.

Dismissing Fayyad would be a huge gamble. The U.S.-educated economist is widely respected in the West and is key to ensuring the flow of hundreds of millions of dollars of international aid. Hamas objects to Fayyad's participation in a caretaker government, claiming he is a pawn of the West.

Al-Ahmad hinted that Fayyad would not be part of the new government. "Fayyad was an obstacle before reconciliation because Hamas insisted on rejecting him, and therefore I hope this obstacle will not be there this time," he said.

The Palestinians have been divided between two governments since Hamas overran the Gaza Strip in 2007. The Fatah-led Palestinian Authority has governed only the West Bank since then.

The division has complicated peace efforts, since President Mahmoud Abbas' Palestinian Authority favors a negotiated peace with Israel, while Hamas is sworn to the destruction of the Jewish state.

The Palestinians claim both the West Bank and Gaza, located on opposite sides of Israel, for a future state. Israeli officials say it is impossible to reach peace as long as Hamas controls Gaza.

Hamas and Fatah first signed a reconciliation plan last May calling for elections and a caretaker government, but the plan has not been implemented, in part because of disagreements over Fayyad.

Fayyad said he would not stand in the way of an agreement. "I have always called for ending the split," he said. "I call upon the factions to find a new prime minister and stop claiming that I'm the obstacle, because I was never an obstacle and will never be."

Abbas and Hamas' supreme leader, Khaled Mashaal, are expected to formally approve the election plan at a meeting in Cairo on Nov. 25, al-Ahmad said.

Salah Bardawil, a Hamas leader in Gaza, said his group is ready to move forward on reconciliation if Fayyad is out of the picture.

"Hamas does not fear the elections and will respect the opinion of the Palestinian people," he said. Hamas won a parliamentary election in 2006.

Even if an agreement is reached in Cairo, implementing it is far from certain. The sides would still have to agree on a list of ministers in the new government, budget issues and how to combine rival security forces.

Any government that includes Hamas would also be shunned by Israel and the West, which have both branded the group a terrorist organization. Hamas has killed hundreds of Israelis in suicide bombings and other attacks and has refused to renounce violence or accept existing partial peace accords.