Mahmoud Abbas, the Palestinian president, has unveiled a new government that excludes Hamas but comprises half of the cabinet from his Fatah faction.
The government was sworn in on Tuesday at a ceremony in the West Bank city of Ramallah.
Palestinian officials said the government has 24 ministers and will be headed by Western-backed Salam Fayyad.
The formation of a new government came a day after Abbas’s Fatah faction and the rival Hamas movement adjourned a fifth round of talks in Egypt without agreeing on a unity deal.
Fayyad, educated in the US before he went on to work for the World Bank and International Monetary Fund, announced on March 7 that he had submitted his resignation to pave the way for a "national consensus" between the two groups.
The rival factions have been on a collision course since Hamas forces ousted Abbas loyalists from the Gaza Strip in June 2007.
Hamas has since been running the Gaza Strip while Western-backed Abbas has been in charge of the West Bank.
Lamis Andoni, Al Jazeera’s Middle East analyst, said: "The cabinet was formed in spite of objections from several Fatah leaders and opposition by Hamas to the idea of the re-appointment of Salam Fayyad.
"Several Fatah leaders expressed serious concern that the formation of the new government would hurt reconciliation talks with Hamas. [They] are worried that the formation of the government would stall or hurt the talks.
"However, most of the new ministers are known supporters of reconciliation with Hamas." Andoni said.
"Some, like Lamis Alami and Ali Al Jarbawi, are former members of the independent Palestinian commission on human rights. The commission documented violations by both the PA and Hamas."
Agreement between the two Palestinian factions is vital for the reconstruction of the Gaza Strip, left in ruins by Israel’s 22-day offensive last December and January that killed more than 1,400 Palestinians and 13 Israelis.
International donors have pledged $4.5bn to the Palestinian Authority at a conference in the Egyptian resort town of Sharm el-Sheikh in March. The bulk of the funds will be used for the reconstruction of Gaza.
But many donor countries refuse to channel their funds via Hamas, insisting Abbas’s government must supervise the spending.
Hamas won Palestinian parliamentary elections in January 2006 and formed a government that March.
However, the cabinet was boycotted by Israel and the West over the group’s refusal to renounce violence and recognise Israel and past peace deals.
Tensions between Hamas and Fatah grew for months afterwards, often erupting into violent clashes, but the two sides managed to form a unity government in March 2007 after Saudi mediation.
But the unity government was shortlived and the government unravelled when Hamas forces drove out Abbas loyalists from the Gaza Strip.
(Aljazeera and Agencies)