Rival Palestinian factions Fatah and Hamas are holding talks aimed at healing their divisions and creating a new unity government. Delegations from the two factions met at the Cairo office of Egypt's intelligence chief Omar Suleiman, who has been leading mediation efforts.

The rivals are hoping to bury the hatchet, after months of bitter feuding, as Suleiman brings them face-to-face to iron out long-standing differences.

The ultimate goal of reconciliation talks between the main Fatah and Hamas factions is to agree on a national unity government acceptable to the international community.  Most international donors are unwilling to help rebuild the war-torn Gaza Strip, so long as Hamas controls the territory.

General Suleiman opened the meeting with tough words, warning the Palestinians that the time has come to end their feud and come together.

He says that success is the only option and a big step has already been taken to end divisions.  The issue, he says, is neither difficult nor impossible.  Palestinians must use their free will, and act, he argues, to achieve national goals, rather than being pawns in regional power games.  You, he warned them, are responsible for a people ... and it is their right to live in peace, security, and prosperity.

At stake are billions of dollars of reconstruction money that are expected to be pledged at a Gaza donors' meeting Sunday in Egypt's Sinai resort town of Sharm el-Sheikh.

Twelve Palestinian factions, including Fatah and Hamas, are attending the reconciliation talks.  Fatah and Hamas have been at each others' throats, since Hamas seized power in Gaza in June of 2007.

Gaza's Hamas leader, Mahmoud Zahar, told participants at the talks that both sides had agreed to take steps, including the release of prisoners, to improve the atmosphere between them.

Both sides, he says, have agreed to respect a truce in the media, as they begin a national dialogue, today, and  have pledged to stop all arrests and free all prisoners being held, to improve the atmosphere.

Zahar told journalists that Fatah had released 80 Hamas members it was holding on the West Bank, but is still holding 300 others.  Hamas reportedly freed an undisclosed number of Fatah members it was holding under house arrest in Gaza.

The top Fatah leader in the Palestinian parliament, Azzam al-Ahmed,  told the conference that both sides had a "real desire" to settle their disputes.

He admits that there were excesses on both sides in Gaza and on the West Bank, and he says that the matter should be put to rest so that no outside party can exploit our divisions ...  We need to address these problems, once and for all, he insists, to restore unity and cohesion in the Palestinian camp.

Egyptian officials stressed that reconciliation talks are focusing on forming an interim Palestinian government, as well as holding presidential and parliamentary elections, and restructuring of Palestinian security forces to suit both sides.