Fatah and Hamas announced the delay late Wednesday after sharp disagreements derailed a plan to return civil power in the Gaza Strip to the Palestinian Authority by Friday.
The handover would end Hamas's 10-year dominance of the blockaded Palestinian enclave and had raised hopes that deteriorating humanitarian conditions in the territory could be addressed.
Hamas says reached deal with Palestinian rival Fatah
Gaza has seen three wars with Israel since 2008.
A range of complex issues remain to be resolved, including security control of the Gaza Strip and the fate of two separate civil administrations.
Previous attempts at reconciliation between Palestinian president Mahmud Abbas's Fatah movement, based in the occupied West Bank, and his rivals from Hamas have previously failed.
The two factions have not publicly presented a plan for how they will resolve remaining issues before the new December 10 deadline under the Egyptian-brokered accord.
Ghassan Khatib, a former Palestinian Authority minister, said he doubted a true handover could occur by the target date, though partial progress may allow the factions to keep the accord alive.
"This decision (to delay) was taken under pressure from the Egyptian delegation," he said.
"The Egyptian delegation wants success, so they suggested 10 days and promised to continue their presence there and to put pressure on the two sides. I personally doubt that they can solve all those issues quickly."
Wednesday's late-night announcement followed a day of turbulence related to the reconciliation deal signed in Cairo on October 12.
Hamas dissolves Gaza administration in Palestinian unity bid
Fatah's top negotiator, Azzam al-Ahmad, told AFP on Wednesday that Hamas was "not committed to the agreement it signed in Cairo."
"Until this moment, the problems and obstacles from Hamas are still there and are increasing."
In response, senior Hamas official Bassem Naim accused Fatah of "manoeuvres" to avoid going through with the deal.
Hamas also accuses Abbas of violating the spirit of the agreement by so far refusing to lift punitive measures, including a cut in electricity payments for Gaza.
Also on Wednesday, PA employees were prevented by union delegates close to Hamas from returning to work at a number of ministries in the Gaza Strip.
Fatah and Hamas traded accusations over the incident.
As tensions built, Abbas ordered an immediate stop to public statements on reconciliation "for the sake of the Palestinian national interest and our relationship with our Egyptian brothers", official news agency WAFA said.
Hamas has controlled the Gaza Strip since seizing it in a near civil war with Fatah in 2007, leaving the Palestinians with two separate administrations.
Hamas due to hand over Gaza in major step toward unity
A first deadline under the accord was met, with Hamas handing control of Gaza's borders to the PA on November 1, but far more difficult issues remain.
After the 2007 power shift, the PA continued to pay around 60,000 staff in Gaza, despite the vast majority not working.
Hamas has hired around 50,000 civil servants to replace them over the past decade, and the fate of those staff is a key sticking point, with unions insisting on a settlement.
The reconciliation agreement stipulates they have until February to find a solution for the Gaza employees, which could include merging the two civil services.
The future of the police force in Gaza as well as Hamas's powerful armed wing is another key dispute between the parties, with the group refusing to disarm.
Abbas insists the PA have security control of the enclave of two million people.
Nickolay Mladenov, UN special coordinator for the Middle East peace process, encouraged the factions to press ahead.
"The agreement that was reached in Cairo is a very important agreement," he told journalists.
"It provides a good framework through which to bring the West Bank and Gaza back under a single legitimate Palestinian Authority."
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