What is behind the referendum call?
A power struggle between Mahmoud Abbas and Hamas has grown since the Islamic resistance movement took office after its defeat of Abbas's Fatah movement in elections. He wants Hamas to bow to foreign pressure to recognise Israel's right to exist and renounce violence as a way to end crippling financial sanctions.
Some in Fatah see the referendum as a way to topple the new administration and Hamas calls it a "coup attempt".
A referendum would force Hamas's hand. While Abbas can sack the government, he would be reluctant to do so unless Palestinians had formally rejected Hamas's political platform first. The referendum could give him the cover to act.
Who drew up the proposal and what does it offer?
Several Palestinian prisoners in an Israeli jail drafted the document. They included Marwan Barghouthi, a prominent Fatah leader seen by some as a future Palestinian president, and Abdel-Khaleq al-Natsheh, a senior Hamas figure.
The proposal calls for a Palestinian state in the West Bank, Arab East Jerusalem and the Gaza Strip, land captured by Israel in the 1967 Middle East war.
While the document calls for continued resistance against Israel, it limits this to occupied land.
How significant is the vote?
The vote would be non-binding, but would be the first time that Palestinians have had the chance to vote directly on whether they favour a two-state solution to decades of conflict.
What options does Hamas have?
Hamas leaders have already called for a boycott, saying the referendum is illegal and unnecessary after Hamas won elections less than five months ago. This could paralyse the Palestinian Authority further and provoke more internal violence.
Whether Hamas eventually takes part or not, it is expected to try to brand Abbas as a stooge of Israel and the US.
It could call on Abbas to step down. But calling new presidential elections would mean changing the Palestinian basic law, which functions as a constitution, and this requires the approval of two-thirds of parliament. Hamas does not have that.
What if there is more violence?
A big surge of Israeli-Palestinian violence could make it hard to hold the vote and discourage support for the proposal, which implies recognising Israel.
Such bloodshed became much more likely on Friday when Hamas's armed wing said it had called off a 16-month-old truce.
What would a referendum favouring Abbas mean?
It would be considered a vote of no-confidence in the Hamas-run government. Abbas might argue that the crisis had reached the point where new leadership was needed and sack the government.
What would a result favouring Hamas mean?
While unlikely, if opinion polls are correct, this would be seen as a vote against Abbas and the policies of Fatah to negotiate with Israel. The government might ask Abbas to step down and urge him to call new presidential elections.
What about Israel and other countries?
Ehud Olmert, the Israeli prime minister, has called the proposal meaningless. Israel has said it intends to keep large Jewish settlement blocs in the West Bank and could never accept the proposed return of millions of refugees and their descendants to homes in territory Israel claims as its own.
A UN special envoy said on May 31 that passage of the proposal would not clear the way for lifting sanctions on the Hamas-run government but could be a step in the right direction.