Palestinian President Mahmoud Abbas has accepted the resignation of Prime Minister Rami Hamdallah and his cabinet, according to the official news agency Wafa, in a move seen as a bid by Abbas to strengthen his position as a decade-old political split deepens.

Hamdallah was later appointed caretaker prime minister by Abbas until a new cabinet is formed.

Replacing Hamdallah after five years is seen by analysts to be part of Abbas' efforts to further isolate his political rival Hamas, which governs the Gaza Strip.

Earlier on Tuesday, Hamdallah announced that he is submitting the resignation of his cabinet, following a recommendation by the Central Committee of Fatah group, in order to form a new government from the factions of the Palestine Liberation Organization (PLO) and independent figures.

Fatah justified the move with the "intransigence of Hamas and its refusal to deal with the government of national reconciliation". But a Hamas official condemned it as an attempt to marginalise and exclude the group from Palestinian politics.

Hamas and Fatah have been at odds since the former gained control of the Gaza Strip in 2007. Since then Abbas' governments have maintained limited self-rule in the occupied West Bank, while Hamas has led a rival government in Gaza.

The two groups signed a reconciliation deal two years ago which set in motion a plan for Abbas' Palestinian Authority to resume governing in Gaza and take control of the coastal enclave's crossing points into Egypt and Israel.

But disputes over power-sharing and policy towards Israel have hampered the deal's implementation.

"The president will begin consultation to form a political government made up by factions of the Palestine Liberation Organization that will prepare for the holding of new parliamentary election," Abbas said.

It remains unclear how the change of government could affect on policy. Abbas remains the primary decision-maker and interlocutor with the international community.

Since September 2013, Hamdallah chaired the government, commissioned by Abbas, and in February 2014 the former formed the government of national reconciliation with an understanding between all Palestinian factions.

The division between the Palestinian parties is seen as a key issue preventing progress in solving the Israeli-Palestinian conflict and improving the situation in the impoverished enclave.