The leader of the secular Fatah faction, Mahmoud Abbas met his counterpart from the Islamist Hamas group Khaled Meshaal for face to face for the first time in more than a year.
The two fell-out in a bloody conflict in 2007 when Hamas seized control of the Gaza Strip.
They reached a reconciliation pact in May 2011 but have until now have failed to agree on how to put it into practice.
After the late night talks Azam al-Ahmed from Fatah's Central Committee told euronews: "We are going to start negotiations aimed at forming an independent national unity government under the leadership of Mahmoud Abbas."
Hamas spokesman Ezat al-Rashq said: "The question of elections will be the subject of an agreement among all parties. The question of the status of the PLO and the role of the electoral commission must also be discussed."
Israel's military assault on Gaza in November and the UN's historic decision to upgrade Palestinians' status have brought both sides together.
Our correspondent Mohammed Sheikhibrahim was the only reporter allowed at the talks in the presidential palace. He said: "A new stage of negotiations reunited all the Palestinian parties aiming for a reconciliation agreement that the Palestinian people have been waiting for after years of divisions."