The Palestinian unity government was said to be on the brink of resigning Wednesday in a deepening rift with Gaza as its de facto rulers Hamas hold separate, indirect talks with Israel.
A Palestine Liberation Organisation official said the government of technocrats formed last year to replace rival administrations in Gaza and the West Bank would be dissolved sometime on Wednesday.
He said it would likely be replaced with a government of politicians.
Officials have said the move had been under discussion for several months because of the cabinet's inability to operate in the Hamas-dominated Gaza Strip.
But Hamas rejected any unilateral dissolution of the unity government.
Palestinian president Mahmud Abbas was quoted as telling members of his Fatah movement on Monday that it would go ahead within 24 hours.
"It will be sometime today," the PLO official told AFP on condition of anonymity.
"The government will continue to function until we have a new one ... I think what's coming now is the formation of a government with politicians, not a government of technocrats."
Hamas spokesman Sami Abu Zuhri however said the Islamist movement had not been consulted and that it opposed any unilateral dissolution of the government.
"Hamas rejects any one-sided change in the government without the agreement of all parties," Zuhri told AFP.
"No one told us anything about any decision to change and no one consulted with us about any change in the unity government. Fatah acted on its own in all regards."
Senior Hamas official Ziad al-Zaza, however, struck a more conciliatory note, calling on Abbas "to form a unity government with all national and Islamic factions to face Israeli occupation."
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The move comes at an important time, with Hamas sources saying it is holding separate, indirect talks with Israel on ways to firm up an informal ceasefire agreement that took hold last August, ending a 50-day war in Gaza.
It was not clear whether Abbas's announcement was linked to the talks, but the PLO official said he believed that it played a role in the decision.
"If you end up having a different kind of status for Gaza, then basically the idea of a Palestinian state completely disappears," the official said.
Another high-ranking Hamas official said he believed Abbas decided to act after receiving word of the indirect contacts.
"When Mahmud Abbas heard of international envoys taking part in talks to solve the (Gaza) crisis, it caught him off guard, then he took that decision," Bassem Naim told AFP.
"He felt there was a possibility that a solution be found without the (Palestinian) Authority being involved."
The indirect talks are said to have gone through a number of Arab and European channels.
A Hamas source said senior members of the Islamist movement had met in Doha over the weekend for talks with the Qataris, with discussions about an agreement of five to 10 years.
They focused on key issues for Hamas such as ending Israel's blockade, now entering its ninth year, and the establishment of a sea passage between Gaza and the outside world, the source said.
He did not say whether other Palestinian factions were involved in the talks, such as Abbas's Fatah movement, which was heavily involved in the Egyptian-brokered talks that ended the 2014 conflict.
The war claimed the lives of almost 2,200 Palestinians, half of whom were civilians, UN figures show. On the Israeli side, 73 people were killed, 67 of them soldiers.
An Abbas spokesman had on Tuesday said a truce that ended the suffering in Gaza would be welcomed, but added that it "must not have as its price a move away from the Palestinian and national consensus."
The Palestinian unity agreement signed in April 2014 sought to end seven years of bad blood between Fatah and Hamas.