In a significant concession, Hamas has offered to turn over all governing responsibilities to Prime Minister Rami Hamdallah. But key sticking points, primarily Hamas' refusal to disarm its powerful military wing, are likely to complicate or even derail the reconciliation efforts in the coming weeks.
Hamas won legislative elections in 2006 and the following year seized control of Gaza after overrunning the Fatah-led forces of Palestinian President Mahmoud Abbas. Since then, Abbas' Palestinian Authority has governed only in autonomous enclaves of the Israeli-occupied West Bank, while repeated attempts to reconcile with Hamas have failed. Hamas have not held elections since.
In previous deals, including one brokered by Egypt in 2011, both sides professed willingness to reconcile, but ultimately balked at giving up power in their respective territories.
They agreed in 2014 to form a national reconciliation government, but Hamas's shadow government has effectively continued ruling Gaza since.
But conditions have changed in recent years. Hamas has been weakened by years of an Israeli-Egyptian blockade, international isolation and three devastating wars with Israel. Gaza today is mired in poverty, with unemployment approaching 50 percent and receiving just a few hours of electricity each day.
Abbas has also stepped up the pressure, saying he will no longer pay for electricity shipments to Gaza and cutting the salaries of tens of thousands of former civil servants and policemen who have sat idle since the Hamas takeover.
With the election of a new leader, Yehiyeh Sinwar, early this year and Egypt offering to ease its blockade, which has largely shuttered the border crossing that serves as Gaza's main gateway to the outside world, Hamas now appears ready to deal.
On Sunday, Gaza was filled with a mood of optimism. Workers were painting a white fence outside Abbas' abandoned official residence, and a Palestinian flag with the government logo was painted on the front door. On a main downtown street, a huge poster of Abbas and Hamdallah hung outside a souvenir store. "Welcome to Palestine's beating heart: glorious Gaza," it said.
In another positive sign, a team of Egyptian mediators arrived and went immediately for meetings with Hamas' leadership. It was the first time an Egyptian delegation has visited Gaza since 2007. Hamas official Mushir al-Masri said the sides will continue their talks in Egypt in the coming weeks to work on a final deal.
While conditions have ripened, reconciliation could nonetheless be elusive as these committees get down to work.
"The obstacles may not appear on the first day, but the bats of darkness, those whose interests would be harmed by reconciliation, may try to sabotage it later," said Ibrahim Abrach, a Gaza political analyst.
Here is a look at the key obstacles that lie ahead:
The Militants: Hamas controls an army of an estimated 15,000 to 20,000 fighters. This militia is a virtual army, armed with rockets, machine guns and mortars, and has no desire to place itself under Abbas' command or to give up its battle against Israel.
Khalil al-Hayya, a top Hamas leader, said in a statement that "the weapon of resistance is outside all equations and was never up for discussion."
A top Fatah official, meanwhile, said Abbas will not accept a situation similar to Lebanon - where the Hezbollah militant group is the most powerful actor in the country even while a civilian government ostensibly rules.
"Abbas will not agree to be an ATM machine in Gaza," the official said, speaking on condition of anonymity because he was discussing internal Fatah deliberations.
The Workers: After Hamas took control of Gaza, Abbas ordered his roughly 75,000 employees, including teachers, civil servants and security men, to resign. Hamas quickly replaced them with 40,000 of its own loyalists.
Until recently, Abbas continued to pay his workers' salaries.
The future of these rival work forces, and who will remunerate them, is sure to be a sticking point at a time when jobs are hard to come by in Gaza.
The Border: Control of the border crossings with Israel and Egypt are a key source of power for Hamas.
These crossings determine who and what comes in and out of Gaza. Hamas has used the crossings to smuggle in contraband, assist its supporters and collect taxes.
Abbas is likely to insist on control of the borders, and Hamas is unlikely to give up this power base.
"We want to have full authority over the crossings. Would they give us that?" said the Fatah official. "In this case they won't know who is coming in and who is going out."
The Rival: Abbas' archrival, Mohammed Dahlan, has taken an increasingly active and visible role in the reconciliation efforts.
Dahlan was Abbas' security chief in Gaza. He moved to the West Bank after the Hamas takeover, but was forced into exile after a falling out with Abbas in 2011.
Based in the United Arab Emirates, Dahlan has forged good relations with wealthy Gulf countries and accumulated large sums of money to build a power base in Gaza.
Over the summer, Hamas announced a separate power-sharing plan with Dahlan that would allow the former strongman to return to Gaza. Hamas says it remains committed to this deal, while Abbas opposes any role for Dahlan.
Israel: Israel considers Hamas, which seeks Israel's destruction, a terrorist group. After fighting three bloody wars against Hamas and losing hundreds of its citizens to the group's attacks over the years, Israel is unlikely to accept any deal that ushers Hamas into the Palestinian government.
Past reconciliation attempts fumbled because of Israeli and international demands for Hamas to disarm, renounce violence and recognize Israel's right to exist. A senior Israeli official said those demands will resurface if the reconciliation efforts proceed.
He said Israel still considers Hamas to be a "ruthless, mass-murdering terrorist organization" that is trying to "gain international legitimacy" without disarming or accepting the international demands.
He spoke on condition of anonymity because the government has not officially commented on the reconciliation process.
Daraghmeh reported from Ramallah, West Bank. Josef Federman in Jerusalem contributed to this report.
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