Talks between the Palestinian factions of Hamas and Fatah have forged an agreement to create a Palestinian unity government, following extensive diplomatic and political efforts.
The agreement could end a period of internecine fighting between the numerous supporters of the two groups, say regional analysts.
The news came as tensions flared elsewhere in the region. The Old City of Jerusalem has seen angry clashes between Israeli police and Palestinians over a contested holy site. Dozens of people were hurt when police moved in to quell protests against excavation work in the area, but a tense peace has now descended.
The violence flared up over the digging work, which demonstrators say threatens the foundations of the al-Aqsa mosque - Islam's third holiest site.
Meanwhile churches and NGOs are among those welcoming the fragile Hamas-Fateh initiative. They say that to succeed it must receive appropriate support from the international community.
UK development agency Christian Aid‚Äôs Middle East expert William Bell said today: "We call on the UK government to capitalise on this opportunity that now exists and to end the isolation of the Palestinian Authority (PA) that has exacerbated poverty and insecurity."
On 31 January 2007 the International Development Committee (IDC) gave its verdict on the humanitarian situation in the Occupied Palestinian Territories and concluded that "...the international community is right to place pressure on Hamas to change those policies which militate against a peace process."
The report continued: "However this would best be achieved through dialogue and engagement rather than isolation‚Ä¶which encourages violence rather than negotiation."
In line with the International Development Committee recommendation, Christian Aid believes it is essential that the international community supports the unity government.
"In particular the UK government must demonstrate its support for the declaration from President Mahmoud Abbas and Hamas political chief Khaled Meshaal by ending the boycott of the PA which has been in place since Hamas won last year‚Äôs parliamentary elections," exaplained Mr Bell.
"The national unity agreement is a major breakthrough by the Palestinians and we hope the UK government will seize this ideal opportunity to move towards constructive engagement with the PA," he added.
"Positive political engagement can help to lay the groundwork for peace, rather than exacerbating tensions that already beset the region," said Mr Bell.
Along with other NGOs who have played a positive role in the region, Christian Aid was one of the organisations invited to submit evidence to the IDC in October 2006, prior to the production of its report.
Churches in Britain and Ireland have long pursued a bipartisan solution to the Israeli-Palestine conflict, calling for justice and autonomy for the Palestinian people and security and peace within agreed borders for the Israelis.