Rival Palestinian factions took a significant step towards reconciliation on Thursday as the Islamist group Hamas said it planned to join Western-backed President Mahmoud Abbas's Palestine Liberation Organization (PLO).

Abbas held a meeting in Cairo with leaders from the factions, including Hamas chief Khaled Meshaal, where a committee was formed to prepare for the inclusion of Hamas, as well as the smaller militant group Islamic Jihad, in the PLO.

There are still some serious obstacles that could prevent a final unity deal and attempts to reconcile in the past have failed.

Hamas and Abbas's Fatah faction have been rivals for years. In 2006, Hamas seized control of the Gaza Strip in a brief civil war, leaving Fatah dominant in the West Bank.

Hamas has refused to recognize Israel's right to exist or renounce violence, while the PLO has signed interim peace accords with the Jewish state. It was unclear how Hamas would be included in the PLO, given the discrepancy.

The committee will now prepare for an internal election of the PLO parliament in order to facilitate Hamas and the Islamic Jihad membership.

One official, who spoke on condition of anonymity, said Hamas's Meshaal had told Abbas that his group was in favour of peaceful resistance and a truce in Gaza and the West Bank at this stage.

The official offered no further explanation on what that might mean. Hamas has said in the past it would agree to a long-term truce with Israel, but remains sworn to its destruction.

A spokesman for Israeli Prime Minister Benjamin Netanyahu said Abbas's overtures to Hamas hurt the chances for peace and called on the international community not to grant the Islamist group legitimacy or recognition.

Hamas is not a political organization that conducts terrorism. Hamas is a murderous, genocidal terrorist organization to the core, said spokesman Mark Regev.

(Reporting by Nidal al-Mughrabi; editing by Andrew Roche)