The Hamas-led Palestinian government ordered its militia off Gaza's streets on Friday in the wake of clashes with President Mahmoud Abbas's rival Fatah movement that stirred fears of civil war.

A Hamas-controlled security force, pictured patrolling in Gaza City, which has been accused of pushing Palestinian factions to the brink of civil war, withdrew from the streets of the Gaza Strip 26 May, said a commander of the paramilitary force. [AFP\File]

The move comes a day after Abbas stunned Hamas with an ultimatum to back a proposal for Palestinian statehood that implicitly recognises Israel or face a referendum on the issue.

Abbas gave the government 10 days to back the proposal, effectively going over the heads of the Islamist militants and setting the stage for a showdown. Hamas seeks to destroy Israel and has rejected Abbas's calls for talks with the Jewish state.

Youssef al-Zahar, a leader of the 3,000-strong Hamas force in the impoverished Gaza Strip, told Reuters the interior minister had ordered the pullback.

"We have received orders to withdraw from the streets and to concentrate in certain locations to be ready to rush to the scene when needed to confront chaos," Zahar said.

Government officials and a Hamas spokesman confirmed the order, saying it was partly to reduce tensions with Fatah.

No members of the force were visible in the streets of the impoverished Gaza Strip early on Friday, Reuters witnesses said.

Clashes between Hamas and Fatah have become more frequent since the unit was deployed last week. Government officials have said the new force would not be disbanded, despite calls from Abbas to do so, but integrated into regular police units.

Abbas and Hamas have been engaged in an increasingly bitter power struggle since the Islamists took office two months ago after beating Fatah in January elections.

Raising the stakes, Abbas on Thursday gave Hamas 10 days to back a plan for a Palestinian state alongside Israel or face what would amount to a confidence vote.

Passage of the referendum might offer Hamas an opportunity to moderate its opposition to Israel and any peace negotiations without having to formally change its stance.

Addressing the first of two days of national dialogue aimed at easing tensions, Abbas said on Thursday that if an agreement was not reached, a referendum would be held in 40 days.

The proposal calls for a peace settlement if Israel withdraws from all of the West Bank and Arab East Jerusalem, occupied since the 1967 Middle East war.

The plan was drawn up in an Israeli jail by senior prisoners from factions including Hamas and Fatah.

Israel has not commented but has long rejected pulling back from all the West Bank. It has said it intends to keep large Jewish settlement blocs there and also considers Jerusalem its "eternal and undivided capital".

Palestinian factions involved in the final day of national dialogue on Friday were expected to debate Abbas's ultimatum.

Hamas leaders have been taken off guard by the normally cautious Abbas. Some have slammed the ultimatum while others said Hamas had nothing to fear from a referendum.

"The government took office only two months ago, so why hold a referendum?" one senior Hamas official said on Friday. "The aim is to make us fail, but we won't."

At the heart of the internal conflict is the refusal of Hamas to accept demands from Abbas and the West to recognise Israel. That stance has triggered an aid boycott that has brought the Palestinian Authority to its knees.

The prisoners' proposal calls for an independent Palestinian state in the West Bank and Gaza, with Jerusalem as its capital. It also seeks a unity government