JERUSALEM -- Turning Gaza City's streets into a swarm of sunshine-yellow flags, hundreds of thousands of Palestinians celebrated the Fatah faction's anniversary Friday in the heartland of its militant Islamist rival, Hamas, the latest in a series of signals heralding possible reconciliation between the parties after their bitter five-year rift.
The rally, which came on the heels of a Hamas celebrations last month in the Fatah-dominated West Bank, added momentum to what Palestinian leaders consider their twin victories in November: Hamas' firing rockets into Israeli population centers of Tel Aviv and Jerusalem, and Palestine's upgrade to nonmember observer state status at the United Nations.
Though it is unclear whether the two sides will ultimately overcome real differences, the show of unity creates a diplomatic quandary for the United States, which has urged Israel to return to negotiations with the Palestinians, but has pushed to exclude Hamas, which it considers a terrorist organization.
Nabil A. Shaath, a Fatah leader who organized Friday's event, and Taher al-Nounou, a Hamas spokesman, each said in separate interviews Friday evening that they expected reconciliation talks to begin under the auspices of the Egyptians within two weeks.
Egyptian President Mohammed Morsi invited Palestinian Authority President Mahmoud Abbas to Cairo, Mr. Shaath said, where he is expected to meet with Hamas political chief Khaled Meshal.
"The climate is excellent for reconciliation," Mr. Shaath said. "I don't think there are any more organizational issues to be settled; what is needed is to sit down and write a political program. Cairo remains the best chaperone for this."
Friday's huge rally, the first Fatah anniversary celebration in Gaza since Hamas took control of the area in 2007, was unimaginable even six weeks ago.
Though more than 170 Gazans were killed and dozens of buildings destroyed during the intense eight-day conflict with Israel, and the U.N. upgrade is largely symbolic, the two events seem to have strengthened both Hamas and Fatah in the Palestinian public's eyes.
A mid-December poll by the Palestinian Center for Survey Research showed Mr. Abbas' approval rating at 54 percent, up from 46 percent in September after a year of free-fall. Ismail Haniya, the Hamas prime minister in Gaza, got an even bigger boost, to 56 percent from 35 percent, and for the first time, the poll showed Mr. Haniya would beat Mr. Abbas in a head-to-head presidential election.
Positive evaluations of conditions in both Gaza and the West Bank also rose significantly, and 39 percent said they expected the two areas to be unified soon, nearly triple the portion who said so three months before.
Granting permission for rivals to hold rallies is one thing, analysts said, but compromising on core principles and actually sharing power quite another. Recent public statements by Mr. Abbas, Mr. Haniya and Mr. Meshal show great gulfs remain in how to deal with Israel, among other things, and Palestinian political experts said they were not as confident as the public that such differences would be quickly worked out.