The two-day talks, which began on Thursday, are being held in Ramallah under the chairmanship of Mahmoud Abbas, the Palestinian president whose once-ruling Fatah party has become increasingly engaged in gunfights with supporters of Hamas, the party in power.
Ismail Haniya, the prime minister, is banned by Israel from travelling to the West Bank and will remain in Gaza City and take part via videophone.
Officials see the talks as a last chance to stop the power struggle between Fatah and Hamas factions, and an opportunity to address the Palestinian Authority's financial problems.
Fatah and Hamas issued appeals for calm on the eve of the meeting.
Ismail Haniya said: "We are in agreement on sending messages to the Palestinian people and the sons of Hamas and Fatah appealing for calm and restraint."
"The entire world is aware that our national cause is in danger and we should therefore work for the success of this dialogue"
Mahmoud Abbas, the Palestinian president
Killings and assassination attempts against Fatah members have prompted calls from leaders on both sides to avoid a descent into civil war, as each blames the other for causing the troubles.
Abbas, speaking to reporters, said: "The entire world is aware that our national cause is in danger and we should therefore work for the success of this dialogue."
Haniya, addressing his cabinet, said: "This national dialogue must succeed. The government is committed to finding an agreement with all factions."
But despite declarations of goodwill, the gulf between Fatah and Hamas is enormous, exacerbated by the financial difficulties facing the Palestinian Authority since the West suspended direct aid.
Ever since Hamas defeated Fatah in elections in January, the two factions have been in a power struggle focused on the control of the security services.
Differences also exist over how to address the occupation. Fatah advocates negotiations with Israel, which Hamas does not recognise and against which it reserves the right to armed resistance.
Fatah is likely to ask Hamas to accept a peace plan adopted by the Arab League in 2002, which would entail implicit recognition of Israel, as a means to alleviate the international boycott of the Palestinians.