The Palestinian Authority's unity government will resign, President Mahmoud Abbas has said.
He told his Fatah faction that the cabinet had to be dissolved because the rival Hamas movement would not allow it to operate in Gaza, which it dominates.
But a Hamas spokesman said it rejected any unilateral dissolution.
The technocratic cabinet, comprising 17 independent ministers, was sworn in a year ago to try to end a long-running rift between Fatah and Hamas.
The two factions had governed separately since Hamas, which won parliamentary elections in 2006, ousted Fatah from Gaza in 2007, leaving the PA governing just parts of the West Bank.
'No consultation'
Although Fatah and Hamas formally backed the unity government, deep divisions remained, resulting in political paralysis, the BBC's Yolande Knell reports.
Hamas dominates the Gaza Strip, where its own security forces operate
Fatah accuses Hamas of trying to create an independent Islamic state in Gaza; Hamas provokes Fatah by saying it avoids new elections as it fears losing them, our correspondent adds.
Israel has insisted it will not deal with a government backed by Hamas, which is sworn to its destruction.
On Wednesday night, President Abbas told members of Fatah's Revolutionary Council that the government would have to be dissolved within 24 hours "because Hamas didn't let it work in Gaza".
However, cabinet spokesman Ihab Bseiso said he was not aware of such a decision. "We had a meeting today and we didn't discuss this issue," he told the AFP news agency.
Hamas also expressed surprise at the president's announcement.
"Hamas rejects any one-sided change in the government without the agreement of all parties," spokesman Sami Abu Zuhri told AFP.
"No-one told us anything about any decision to change and no one consulted with us about any change in the unity government. Fatah acted on its own in all regards."
