Under the agreement announced on Wednesday, rival groups Fatah and Hamas will form a government together under the umbrella of the Palestinian Liberation Organisation (PLO).
The groups plan to form a national unity government in five weeks and will hold elections in six months, Al Jazeera reported.
At a news conference, leaders of all the groups said the past divisions had taken a toll on the Palestinian goal of establishing an independent state with Jerusalem as its capital.
Ismail Haniyeh, the Hamas leader who announced the terms of the agreement, said the deal came as "the entire city of Jerusalem has been painted Jewish with an attempt to wipe out the Arab identity and desecrate the Muslim and Christian sanctities".
Azzam al-Ahmed, the Fatah delegation head, said he hoped the pact "will be a true beginning for a true partnership in all our spectrums; political, social and societal".