The order on Friday came a day after Mahmoud Abbas, the Palestinian president and head of Fatah, gave Hamas an ultimatum to back a proposal for 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 party. Hamas seeks to restore the land that Israel seized in 1948 and considers it to be part of historical Palestine. It 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 Gaza Strip, said the interior minister had given the men their orders.
"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," al-Zahar said.
Reducing the tension
Government officials and a Hamas spokesman confirmed the order, which they said was partly to reduce tensions with Fatah.
Clashes between Hamas and Fatah have become more frequent since the new 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.
Clashes between Hamas and
Fatah are frequent
Abbas and Hamas have been at loggerheads since the Islamists took office two months ago after beating Fatah in elections in January.
Two states option
On Thursday, Abbas gave Hamas 10 days to back a plan for a Palestinian state alongside Israel or face what would amount to a confidence vote.
But Ismail Haniya, the Palestinian prime minister, vowed on Friday that the Hamas-led government would make no concessions despite the threat by Abbas.
"We will not make political concessions," Haniya told worshippers at a Gaza mosque. "Even if they besiege us from all directions, they should not dream that we will make any political concessions," added Haniya.
A referendum might offer Hamas an opportunity to moderate its opposition to Israel and any peace negotiations without having formally to change its stance.
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 prisoners from factions including Hamas and Fatah.
Israel has not commented but has said it intends to keep large settlement blocs in the West Bank and also considers Jerusalem its "eternal and undivided capital".
Palestinian factions involved in the final day of so-called national dialogue on Friday were expected to debate Abbas's ultimatum.