President Barack Obama has warned the Palestinians that efforts to delegitimise Israel will end in failure but also called on Israel to also take "bold action" towards peace.

Hamas and Fatah have signed a reconciliation deal in Cairo.

Palestinian Authority President Mahmoud Abbas said the deal, which paved the way for elections and a power sharing arrangement, would end "four black years" of infighting.

A Palestinian official close to President Mahmoud Abbas has called the demand that Hamas recognises Israel's right to exist "unfair".

Benjamin Netanyahu has appealed to Palestinian President Mahmoud Abbas to call off the reconciliation agreement between Fatah and terrorist organisation Hamas.

The deal is to be celebrated at a Cairo ceremony tomorrow, paving away for a unity government and elections.

The Palestinian Authority has hailed the killing of Osama bin Laden as a step towards overcoming the violent tactics of al-Qaida and other terrorist groups.

However, the comments by PA spokesman Ghassan Khatib came as jihadist groups vowed revenge for the death of their leader.

Mr Khatib said: "Getting rid of bin Laden is good for the cause of peace worldwide.

Israel and the United Sates have reacted with caution to the announcement of a reconciliation agreement between Fatah and Hamas.

The longtime rivals revealed last night that they had reached a deal to form an interim government for the Palestinian Authority and to set a date for an election.

Longtime Palestinian rivals Fatah and the terrorist group Hamas are understood to have reached a deal to form an interim government following reconciliation meetings in Cairo.

Egyptian officials told state television that the agreement would include setting a date for a general election.

Palestinian president Mahmoud Abbas has announced he will not seek re-election.

Palestinian Authority elections are expected to take place in the next six months.

Mr Abbas said he was making plans to travel to the Gaza Strip to reconcile the territories in order to conduct elections for a united government.