Jerusalem (CNN) -- Rival Palestinian political factions Fatah and Hamas named President Mahmoud Abbas the head of an interim unity government during a televised signing ceremony Monday.
The deal was signed in Doha, Qatar, by Abbas and Hamas leader Khaled Meshaal, who said last month he plans to step down from his post.
"The Palestinian reconciliation is no longer a Palestinian interest but also an Arab interest," Abbas said.
"Both parties are serious in moving forward to fold the page of strife between both parties and to strengthen the Palestinian national unity government," according to Meshaal.
Independent Palestinian lawmaker Mustafa Barghouti said the agreement represents progress.
"What we see is a slow movement, and we hope that this meeting will give a push to reconciliation to go faster," he said. "I hope that the most important thing that this agreement will lead to is actual activation of (a) real democratic system and that all obstacles that are still in the way of election will be removed."
Prime Minister Salam Fayyad expressed hope that a government headed by Abbas will be formed quickly and hold elections, "which would consequently end the internal division."
"The prime minister said this achievement is a response to our people's aspirations and ambition to reunify the homeland and its institutions," a statement from the Palestinian Cabinet said. "This is an imminent national necessity in addition to being a cornerstone in utilizing our people's capabilities to guarantee ending the occupation and continuing our national readiness for the establishment of the independent State of Palestine with Jerusalem as its capital on 1967 borders."
Hanan Ashrawi, a member of the PLO executive committee, said, "The international community has persistently used this division against us, particularly the U.S., when it described the Palestinians as not qualified for statehood because we are divided, so this would remove one pretext."
But Israeli Prime Minister Benjamin Netanyahu presented the agreement in a very different light.
"Hamas is a terrorist organization that strives to destroy Israel, and which is supported by Iran," Netanyahu said Monday at a meeting of the Likud party in the Knesset, Israel's parliament. "Hamas and peace do not go together.
"Over the past few weeks, Israel and elements in the international community have made great efforts to advance the peace process." If Abbas implements the deal signed in Doha, Netanyahu said, "he will have chosen to abandon the way of peace and to join with Hamas, without Hamas having accepted the minimal conditions of the international community. Not only does Hamas not recognize Israel and the (previously signed) agreements, it has not abandoned terrorism. It is continuing with terrorism and to arm itself in order to perpetrate even deadlier terrorism."
Netanyahu added a message to Abbas: "It is either peace with Hamas or peace with Israel; you cannot have it both ways."
The deal comes amid increased pressure from various Arab countries and Turkey for Hamas to distance itself from the Syrian regime of Bashar al-Assad.
For more than 10 months, Syrian security forces have carried out a brutal crackdown against anti-government protesters. United Nations officials have said an estimated 6,000 people have died, and opposition activists estimate at least 7,300 people have been killed.
For years, Hamas has maintained its headquarters in Syria's capital, Damascus, and has received both monetary and military support from the al-Assad regime.
But in an apparent nod to changing regional politics, Hamas is distancing itself from its long-time patron.
In recent weeks Hamas personnel and their families have left Syria. In a recent regional trip, Hamas Prime Minister Ismail Haniya did not visit Syria.
The national reconciliation agreement came together last year after lengthy negotiations. The deal establishes a new parliament and a date for general elections, tentatively scheduled for May.
The move comes amid international efforts for statehood advanced by the Palestinian Authority's Abbas of Fatah. It could portend unity in the fractious Palestinian territories.
The two political factions have been close to civil war, culminating in 2007 when Hamas took control of Gaza after deadly fighting with Fatah partisans. Fatah retained control of the other Palestinian territory, the West Bank.
The Mideast Quartet -- made up of the United States, the European Union, Russia and the United Nations -- has called on the new government to renounce terror and recognize Israel.
The deal signed Monday also includes an agreement over security issues that have kept the two sides apart, Hamas officials have said.
For years, there has been a big divide between the hard-line, anti-Israel Hamas and Fatah, which has engaged in peace negotiations with Israel.
In the recent past, both sides sought reconciliation, but those efforts failed.
Hamas is an Islamist political movement based in the Palestinian territories of Gaza and the West Bank.
It was formed in 1987 at the start of the first Palestinian intifada as an Islamic resistance movement to Israeli occupation. It took control of Gaza in 2007 after failing to maintain a coalition government with the Palestinian Authority, dominated by its rival Fatah.
The group's military wing, Izzedine al Qassam, has claimed responsibility for terrorist operations including suicide bombings, car bombings, and rocket attacks in Israel, as well as attacks on Israel settlers who live in the West Bank and previously lived in Gaza. Those attacks have claimed the lives of hundreds of Israeli civilians.
The United States and the European Union consider Hamas a terrorist organization.
Israel and militants in Gaza have fought continually for years. Israel has retaliated against Gaza militants who have fired missiles into southern Israeli towns.
CNN's Kareem Khadder and Kevin Flower contributed to this report.