Hamas vowed to avenge the killing of a top leader in its armed wing today as violence erupted and efforts to form a Palestinian unity government got bogged down in disagreement.
A Fatah official denied responsibility for the killing of Ala al-Haddad, Gaza City commander of Hamas's armed wing, the Izz el-Deen al-Qassam Brigades.
Two other people were wounded in the incident, both members of a Hamas-led police force.
Fatah maintained the shootings was the result of a clan feud.
Shortly afterwards Palestinian President Mahmoud Abbas met with Prime Minister Ismail Haniyeh to discuss who would hold the post of interior minister - a key a position that involves control of the security services.
Under the agreement to form a unity government concluded in Saudi Arabi, Hamas will choose the interior minister but Mr Abbas has a veto.
Last week both sides had said they were on the verge of announcing an agreement, but a source close to the talks said today that filling the post had become a "real obstacle" to a final deal.
Mr Abbas has rejected several of Hamas's candidates while Hamas has balked at 12 names proposed by Mr Abbas.
Mr Haniyeh is expected to propose a new list of names today, but it is unclear whether he will accept any of them, officials said.