Palestinian President Mahmoud Abbas said on Saturday any unity government with Hamas would have to agree to a two-state solution with ‘Israel', a demand quickly rejected by his political rivals.

"We are moving in steady steps towards ... a national unity government that abides by our known commitments, which include the two-state vision and the signed (peace) commitments," Abbas said in the West Bank city of Ramallah.

Hamas official Ayman Taha in Gaza said Abbas's comments undermine chances for reaching a unity agreement.

"We reject any pre-conditions in the formation of the unity government. Hamas will never accept a unity government that recognizes ‘Israel'," Taha said.

A dozen Palestinian factions including Fatah and Hamas began reconciliation talks in Cairo on Thursday to try to agree by March 20 on a unity government. Previous efforts by Arab negotiators to reconcile Fatah and Hamas have failed.

A deal could lead to the lifting of ‘Israel's' blockade of the Gaza strip and boost Abbas's peacemaking efforts with ‘Israel'.