Palestinian Authority President Mahmoud Abbas is expected to ask Hamas prime minister-designate Ismail Haniyeh to form a new government Tuesday.
Hamas wants to build a coalition government, but Mr. Abbas's Fatah party and the militant Islamic Jihad group have declined to join.
The new Palestinian government is facing a financial crisis because of Western threats to cut aid and Israel's freeze on the transfer of customs revenues it collects for the Palestinian Authority.
Iran is urging Muslim nations to make up the funding shortfall. Hamas leader Khaled Mashaal said Tuesday Iran will play a greater role in Palestinian affairs.
Israel has said it will not have contact with a Hamas-led government, but Israel's interim Prime MInister Ehud Ohlmert said Tuesday there is still hope for reaching peace.
Some information for this report was provided by AFP, AP and Reuters.