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Prime Minister Ismail Haniyeh of Hamas said he would present the new government to parliament this weekend for final approval.

"Today is an occasion to celebrate. We have done everything," he said after a late-night meeting with President Mahmoud Abbas of Fatah.

Both sides hope the alliance will bring the Palestinians out of international isolation after a yearlong boycott of the Hamas-led government. Israel and Western countries have reacted coolly to the deal, but say they are waiting for final details before deciding whether to lift the embargo.

Haniyeh and Abbas agreed to the power-sharing deal last month in Saudi Arabia, but had spent the past few weeks ironing out the final details. One of the major obstacles was agreeing on a new interior minister, a sensitive post that oversees several powerful security forces.

The new interior minister will be Hani Kawasmi, according to Mustafa Barghouti, the incoming information minister. Kawasmi is currently a senior civil servant in the Interior Ministry who has good relations with both Hamas and Fatah, but does not belong to either party.

Barghouti said other key appointments included Salam Fayyad, an internationally respected economist, as finance minister; and Ziad Abu Amr, an independent lawmaker, as foreign minister.

Haniyeh will remain as prime minister, and Azzam al-Ahmed, head of Fatah's parliament bloc, will be deputy prime minister.

Haniyeh said he would formally announce the Cabinet on Thursday. In all, Hamas will get nine Cabinet posts and Fatah will get six.

Nabil Abu Rdeneh, a top aide to Abbas, urged the international community to give the government a chance, despite misgivings about Hamas. Israel, the U.S, and European Union consider the Islamic militant group, which has killed scored of Israelis in suicide bombings, a terrorist group.

"There will be a new Palestinian government and we call on all parties, including the Arabs, to work and live with this government, and to give it an opportunity," Rdeneh said.

Hamas trounced the more moderate Fatah in parliamentary elections last year, giving it control over most government functions. But the Hamas-led government was crippled by Western sanctions imposed over its refusal to recognize Israel's right to exist.

Abbas, who was elected separately in 2005, has been pushing Hamas since last fall to join Fatah in a more moderate coalition in hopes of lifting the Western boycott. The negotiations collapsed repeatedly, often sparking rounds of deadly factional fighting in Gaza.

As negotiations continued, there was an exchange of fire Wednesday between Hamas and Fatah forces in the northern Gaza Strip. Security officials said nine people, including five bystanders, were slightly wounded in the shootout. More than 130 people have died in the infighting since May.

Fears of further bloodshed led Abbas to agree to the power-sharing deal at talks in Saudi Arabia last month, even though the agreement falls short of the international demands for Hamas to renounce violence, recognize Israel and accept past peace agreements. Abbas has told Western powers that the deal ¡ª which includes a vague pledge to "respect" past agreements with Israel ¡ª is the best he could get from the militant group. The U.S., European Union and Israel have labeled Hamas, which has killed scores of Israelis in suicide attacks, a terrorist group.

The two sides had been eager to complete the coalition talks ahead of an Arab summit later this month in Saudi Arabia. Also, Secretary of State Condoleezza Rice is expected in the region at the end of next week as part of a push to restart peace efforts with Israel.

Israel has maintained its wait-and-see approach to the emerging Palestinian government. Prime Minister Ehud Olmert has warned he will not work with the government if Hamas does not soften its position toward Israel.

"We expect the new Palestinian government to accept all three of the international principles," Israeli government spokeswoman Miri Eisin said.

Israel also expects to see an Israeli soldier captured in June by Hamas-affiliated militants freed before the new government convenes, Eisin said. Egyptian mediators have been trying to negotiate a prisoner exchange.

Hamad said there are "concerted efforts" to win the soldier's release but said a deal wasn't imminent. "I don't think he'll be released before a government is formed, but we hope it will be resolved soon," he said.