GAZA CITY, Gaza Strip (AP) – The rival Hamas and Fatah movements put the final touches on a Palestinian Arab unity government Thursday, but Israel quickly condemned the coalition as a “step backward” and said it would try to rally international opposition to it.

The Palestinian factions hope their alliance will end bloody internal fighting and lead the Palestinian government out of international isolation. But the Israeli reaction signaled trouble for the unity plan.

Western countries have said they are waiting for the new government to take office before deciding whether to lift their economic sanctions against the Palestinian government.

Hamas and Fatah leaders wrapped up months of tortuous coalition talks late Wednesday, saying they would present their coalition to parliament for approval on Saturday. On Thursday, Prime Minister Ismail Haniyeh of Hamas was to present the list of Cabinet ministers to President Mahmoud Abbas.

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

Messrs. 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. Clearing the final obstacle, the men agreed on the appointment of a new interior minister, a sensitive post that oversees several powerful security forces.

Officials identified the new minister as Hani Kawasmi, a senior Interior Ministry civil servant who has good relations with Hamas and Fatah, but does not belong to either party. Mustafa Barghouti, the incoming information minister, confirmed the appointment.

Mr. 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.

Mr. Haniyeh planned to formally announce the Cabinet on Thursday. In all, Hamas will get nine Cabinet posts and Fatah will get six.

Israel and the Quartet of Mideast peace makers – America, EU, U.N. and Russia – have said Hamas must renounce violence, recognize Israel’s right to exist and accept past peace agreements.

The government platform, posted on Hamas and Fatah web sites, includes only a vague pledge to “respect” past peace deals, falling short of explicit recognition of Israel.

The government program also affirms the Palestinians’ right to resist and “defend themselves against any Israeli aggression.” At the same time, the platform calls for maintaining and expanding a truce with Israel.

While many in the West consider “resistance” to be a code word for violent attacks, the Palestinians have a much vaguer definition, including anything from armed attacks to street protests.

In the first Israeli reaction to the deal, a senior Israeli government official on Thursday called it a “step backward” for peace prospects. The official who spoke on condition of anonymity pending a formal Israeli announcement said Israel would try to rally international opposition to the government.

Nabil Abu Rdeneh, a top aide to Mr. Abbas, urged the international community to give the government a chance, despite misgivings about Hamas. Israel, America, 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,” he said Wednesday.

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.

Mr. Abbas, who was elected separately in 2005, has been pushing Hamas since last autumn 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 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 last 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 to renounce violence, recognize Israel and accept past peace agreements.

Mr. Abbas has told Western powers that the deal is the best he could get from the militant group.

The Palestinian factions were eager to complete the coalition talks ahead of an Arab summit later this month in Saudi Arabia, where they hope to win wider recognition and funding for their new government.

Also, Secretary of State Rice is expected in the region at the end of next week as part of a push to restart peace efforts.