Salam Fayyad will announce his intention to refuse to head the new unity government if he is offered the post, sources close to the appointed West Bank Prime Minister told Ma’an.
Fayyad has publicly said he would accept whatever parties decide in Cairo.
Fatah’s central committee nominated Fayyad as the party’s choice for the position, a party official said following a meeting of the Fatah leadership in Ramallah on June 11.
Hamas swiftly rejected the proposal.
"Hamas will not agree on Salam Fayyad as a prime minister, or even a minister in the upcoming unity government," senior Hamas leader Salah Al-Bardawil said in a statement.
On Sunday, Hamas and Fatah announced they had postponed talks to discuss the formation of an interim government of independents called for by a unity deal which rival factions Hamas and Fatah signed in Egypt last month.
The meeting had been scheduled to take place in Cairo on Tuesday.
Fatah representative Azzam Al-Ahmad said the meeting was delayed "to ensure the best atmosphere for the successful implementation of the reconciliation agreement."
But the decision prompted speculation that talks had stalled over the issue of who would head the transitional government.
Officials in Ramallah told Ma’an that Fayyad did not want to be an obstacle to unity.
Hamas has not yet publicly announced its candidates for prime minister, but Hamas sources said Gaza popular committee leader and former information minister Jamal Al-Khudari and business mogul Mazen Sinokrot were being considered by the party.
The Palestinian leadership is facing international pressure to keep Fayyad on in a bid to maintain the flow of donor money to the government.
The international community has roundly praised Fayyad, a former World Bank official, for his efforts to build Palestinian institutions and prepare for statehood, even in the absence of peace talks with Israel.