Details of the agreement have not yet been released and a news conference was being planned for Thursday at 10:00 GMT in the Egyptian capital, where talks have been taking place since Tuesday.
Egypt has helped mediate several attempts to reconcile the two movements and form a power-sharing unity government in Gaza and the West Bank.
United Nations Secretary-General António Guterres has congratulated by phone Mahmoud Abbas, President of the State of Palestine, on the intra-Palestinian agreement, signed earlier Thursday in Cairo.
Certain success in overcoming the split was reached in September when Cairo hosted talks of Egypt's intelligence first with the Hamas delegation and then with Fatah emissaries.
A statement from Netanyahu's office said that Israel "will examine developments in the field and act accordingly".
He added that all Palestinian factions would begin wider negotiations on the formation of a national unity government in the coming two weeks.
Fatah officials said the two sides agreed that the Palestinian Authority would take over responsibility for Gaza's border crossings no later than November 1 and that full governing responsibilities would be handed over to the Palestinian Authority by the beginning of December.
Gaza has been subject to an Israeli blockade and Fatah strangulation of electricity and other resources since, which has crippled the economy and left much of the two million strong population dependent on aid.
Yahya Sinwar, Hamas's acting chief in Gaza, for his part, congratulated Abbas on the watershed agreement.
Hamas and Fatah have reached a reconciliation agreement in Cairo, Reuters reports citing the Palestinian Information Centre.
The crossing with Egypt may require more time for the handover, with construction work now underway there.
He went on to say that Abbas planned to reverse all measures he had recently taken against the Gaza Strip, which since mid-2007 has been governed by Hamas.
Security cooperation between Fatah and Hamas could include, among other things, the deployment of 3,000 Fatah security officers, who would join the Gaza police force over a period of 12 months.
The agreement, which is a reactivation of a previous deal signed in 2011, was signed in the presence of Egyptian Intelligence Minister Khalid Fawzi. Hamas and Fatah agreed to transfer administration of Gaza to Union government at latest until December 1st.
The official was referring to the diplomatic Quartet on Middle East peace, which includes the United Nations, the United States, the European Union and Russian Federation. Internal Palestinian strife has been a major obstacle to peacemaking, with Hamas having fought three wars with Israel since 2008 and continuing to call for its destruction.
In return, Cairo pressed Hamas to move forward on reconciliation with Fatah. "Unity and national reconciliation among the Palestinian people are our strategic option for moving forward".
One of the key sticking points will be the fate of Hamas's 25,000-strong military wing, the Ezzedine al-Qassam Brigades.
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