Young Fatah dissidents said they were forming a new party, dealing Abbas a blow less than six weeks before a parliamentary election where Hamas, whose power has increased since the start of an uprising in 2000, will challenge Fatah for the first time.
The rift in Fatah's ranks, which could boost Hamas ahead of the parliamentary ballot on 25 January, came as Israel launched a new round of Gaza air strikes and Palestinian resistance fighters increased their rocket attacks against the Jewish state.
Defying Abbas, a younger generation of Fatah leaders led by jailed firebrand Marwan Barghouthi announced on Wednesday night they were running for parliament on a competing ticket, triggering one of the gravest crises in Fatah's 40-year history.
Hamas is likely to pose a stiff
challenge to Fatah in January polls
The official Fatah list presented with Abbas's approval included Prime Minister Ahmed Qurie, a former Yasser Arafat loyalist. Qurie resigned on Thursday, as required by law for cabinet members running for parliament. There was no immediate word on who would replace him.
Fatah's younger generation has voiced fears that continued domination by the old guard, widely viewed as tainted by corruption and cronyism, will benefit its rival, the Islamic group Hamas.
The Fatah dissidents, unhappy about not getting enough slots on the party ticket, registered their own list, prompting Fatah officials to begin contacts to unify the group, long a dominant force in Palestinian politics.
Abbas and Barghouthi, who is serving five life terms in Israel over attacks during the Palestinian uprising, spoke by phone and agreed to further discussions. Barghouthi's supporters believe he could be freed in a future peace deal.
"We will employ every damage-control mechanism to avoid Fatah's division," Palestinian negotiator Saeb Erekat said.
Palestinian cabinet mnister Qaddoura Fares, also part of the new party's roster, told a press conference that Barghouthi had told aides to remove his name from the Fatah list. Others insisted they were not quitting Abbas's group.
Abbas still hoped to persuade the rebels to withdraw their list. Candidates have until 1 January to decide whether to remain on the ballot.