President Mahmoud Abbas will swear in a new emergency cabinet on Sunday as the Palestinian people appear to be splitting into two geographically separate political entities.
The moderate Fatah faction tried to chase its Islamist Hamas rivals out of Parliament in the West Bank and battle back against Hamas control of the Gaza Strip.
"It's out of control," said Palestinian politician Saeb Erekat. "We have a major political problem. We have a disaster, a major catastrophe with this armed takeover in Gaza."
Relative calm has fallen over Gaza after a week of intense factional fighting, with Hamas strengthening its hold.
However, residents were stocking up on essentials, fearing looming shortages.
Hundreds of Gazans, including Fatah supporters, went to the border with Israel. They were trying to escape the territory and Hamas rule. But they found the gates locked.
Abdel Salam Abu Nada, the head of Palestine TV, said he crawled for several hundred metres to evade gunfire at the crossing before he reached safety.
"Hamas has always targeted me. Once they fired shots are my car. And they wrote on their website that I am broadcasting sedition," he said.
Recently, a text message showed up on his cellphone warning, "Your punishment is coming."
In a symbolic gesture in Gaza, the home of late Palestinian leader Yasser Arafat was stormed by a crowd of looters that destroyed the house. They took furniture, wall tiles and the former leader's personal possessions.
The home -- empty since 2001 when Arafat moved to the West Bank -- was a powerful symbol of the Fatah movement in Gaza. Arafat founded Fatah and led it for 40 years.
While Fatah tried to assert control over the West Bank, Hamas politicians claimed Abbas's attempt to dismiss the government was illegal.
Abbas issued a decree shortly after midnight on Saturday that annulled a law requiring parliamentary approval of the new government. Hamas dominates parliament.
"This escalates the crisis, and the president bears the responsibility for all the consequences of these developments," Hamas spokesman Sami Abu Zuhri said.
On Thursday, after days of bloody factional fighting, moderate Palestinian President Mahmoud Abbas dismantled the tenuous coalition government comprised of his Fatah party and Hamas, fired Hamas leader and Prime Minister Ismael Haniyeh, and called for a new government.
International community
Meanwhile, the U.S. told Palestinian President Mahmoud Abbas it will lift an aid embargo once he severs ties with Hamas and forms a new government.
Abbas met with the U.S. consul general in Jerusalem, Jacob Walles, on Saturday at Abbas' Ramallah headquarters.
Aides to Abbas told the Associated Press that Walles said Washington will lift a ban on direct aid to the new emergency government as soon as all ties with Hamas are severed. That would likely clear the way for Israel and the European Union to also resume aid shipments.
The European Union issued its own statement expressing support for Abbas.
And Israeli Prime Minister Ehud Olmert said late Saturday that a new Palestinian government might allow the peace process to move forward.
"We have a new opportunity ... that we haven't had in a long time," Olmert told reporters on board his plane shortly before flying to Washington for a meeting with U.S. President George W. Bush.
"The situation has changed, which enables diplomatic progress ... We intend to act to take advantage of this situation," he said. "A government that is not Hamas is a partner."
Avi Dichter, Israel's public security minister, said his country would allow basic supplies into Gaza to prevent a humanitarian disaster.
However, Israel would consider a Hamas-controlled Gaza a "terrorist" entity and would try to cut off its weapons supply. This might require an Israeli troop deployment along the Gaza border with Egypt, he said.
Israel pulled its forces out of Gaza in 2005, ending a 38-year-old occupation.
Gaza and the West Bank are 45 kilometres apart, separated by Israel.
With a report from CTV's Denelle Balfour and files from The Associated Press
