The agreement, signed in Cairo on Thursday after mediation talks, states that the Fatah-dominated Palestinian Authority will resume administrative control of the Gaza Strip by 1 December.
Palestinian Authority president Mahmoud Abbas said he considered it a “final agreement to end the division”.
However, analysts stressed that many details still need to be resolved.
Hamas and Fatah have been separated since 2007, when a civil war between the opposed factions left Mr Abbas heading the Palestinian Authority in the West Bank, while Hamas ruled the Gaza strip.
“As it is they control two different territories, and they don’t really control these,” Yossi Mekelberg, a senior research fellow at the Royal Institute of International Affairs at Chatham House, told Sky News.
Both territories are subject to control by Israel, which occupies the West Bank and controls the borders of the tiny Gaza Strip, which has endured devastating bombardments during wars with the state in the last decade.
In response to the news, Israeli Prime Minister Benjamin Netanyahu said reconciliation would make “peace (with Israel) much harder to achieve”.
The agreement includes placing some 3,000 Fatah officers in the Gaza police force and designating control of borders to the Palestinian Authority. Hamas will remain the strongest military force.
The parties are debating a potential date for elections but plans are unconfirmed.
Despite the deal, they remain divided on major issues.
Fatah enjoys western support; Hamas, considered a terrorist organisation by many western states, recently dropped a call for Israel’s destruction but does not recognise its right to exist.
The split dates back to 2006, when Hamas swept to victory in Palestinian elections. It came as a shock to western powers and Israel, and sanctions were imposed in response.
The civil war that followed left dozens dead and the rival factions effectively controlling separate territories.
Several attempts have been made at reconciliation but all have failed.
Many Palestinians view Thursday’s deal with scepticism.
Mr Mekelberg told Sky News he believed it was significant, but said: “The devil is in the details.”
He continued: “The level of anger between two sides – what happened, what the PLO (Palestine Liberation Organisation) did to Hamas, the hostilities in 2007 – it’s all in the collective memory.
“So even for there to be negotiations and to sign an agreement is a huge achievement.”