Palestinian rivals Fatah and Hamas met Tuesday in Cairo and appeared headed toward resolving differences hindering the formation of a unity government.

Western news agencies say a meeting is scheduled for next week between Palestinian President Mahmoud Abbas and Hamas chief Khaled Meshaal where the two sides will unite on a candidate for prime minister and a new Cabinet.

The Palestinian unity agreement signed with much fanfare last month has run into trouble in recent days.

The Islamic militant group Hamas rejected the Fatah faction's nominee for prime minister, threatening the reconciliation agreement reached six weeks ago in Cairo.

The unity deal is aimed at reconciling rival Palestinian governments: Hamas rules the Gaza Strip while Fatah heads the more moderate Palestinian Authority in the West Bank.

Fatah has wanted the current prime minister of the Palestinian Authority, Salam Fayyad to serve as prime minister.

Hamas officials say Fayyad cannot head a unity government because he cooperated with Israel's blockade on Gaza and shared responsibility for the arrest of Hamas leaders in the West Bank.

The Palestinian Authority intends to seek United Nations recognition of a Palestinian state in September, but without a unified front, that plan could be in jeopardy.