Palestinian President Mahmoud Abbas has endorsed a unity deal with his Islamist rivals Hamas on ending a four-year rift that has split the Palestinians ideologically and geographically.

The Egyptian-brokered deal, denounced by Israel, calls for forming an interim government to run the occupied West Bank and Gaza Strip and prepare for a general election within a year.

The deal aims to form a Palestinian government made up of independent figures.

The government's main tasks will include: preparation for elections; dealing with internal issues resulting from the Palestinian split; following up on Gaza reconstruction and lifting the Gaza blockade; uniting Palestinian Authority institutions in the West Bank and the Gaza Strip.

Terms of the unity deal are to hold elections to the Palestinian Legislative Council, the presidency and the Palestinian National Council, a body representing Palestinians in the Palestinian territories and the diaspora, within a year from the date of signing.

The deal also is to agree on the makeup of a committee to oversee elections.

A supreme security council is to be devised through consensus, made up of 'professional officers' as a step towards reform of separate security forces operated by the rival administrations.

It is hoped that the Palestinian Legislative Council will reconvene, it has not met since Hamas seized control of Gaza in 2007.

They hope to free political prisoners held by the rival administrations in Gaza and West Bank.

Officials on both sides deny the presence of political detainees.

A committee will look into lists of names and verify causes of their imprisonment.

Earlier, Israeli Prime Minister Benjamin Netanyahu has said that a unity pact between Fatah and Hamas was a 'tremendous blow to peace' and vowed to press the point in his talks with British and French leaders.

Netanyahu made his comments in London after Palestinian president and Fatah leader Mahmud Abbas buried the hatchet with Hamas leader Khaled Meshaal at a ceremony in Cairo today, ending a nearly four-year feud.

Netanyahu told reporters ahead of talks with British Prime Minister David Cameron that 'what happened today in Cairo is a tremendous blow to peace and a great victory for terrorism.'

He added that Hamas's recent condemnation of the killing of al-Qaeda leader Osama bin Laden by US forces proved that bringing the group into mainstream Palestinian politics would harm chances of peace in the Middle East.

David Cameron's Downing Street office said that the Hamas-Fatah deal would hopefully be a 'step forward', adding that the British premier would urge Netanyahu to press ahead with efforts to find a resolution to the conflict.

Netanyahu is fiercely opposed to the militant Islamist Hamas movement having any role in a caretaker Palestinian government being formed by Abbas, and intends to say so clearly in his talks with Cameron and Sarkozy.

Netanyahu wants European leaders to oppose, or at least abstain, if the Palestinians seek United Nations recognition of a unilateral declaration of statehood when the body's General Assembly convenes in September.

Israel and the US oppose a unilateral Palestinian statehood bid, saying sovereignty can only be achieved through negotiation.