The talks between Fatah and Hamas were conducted after Egypt tried several times to resolve the conflict between the two factions and establish a unity government in Gaza and the West Bank.
Thursday's signing of the agreement in Cairo was reached after two days of Egyptian-brokered negotiations.
A statement from Netanyahu's office said that Israel "will examine developments in the field and act accordingly".
"All the measures taken recently will end very shortly", Zakaria al-Agha, a senior Fatah leader in the Gaza Strip, told AFP. Hamas has said it hopes that by giving back power to the Palestinian Authority, life in Gaza can improve.
The two sides had been meeting in the Egyptian capital this week with the aim of ending a crippling decadeold split between the two sides.
A split between Palestine's two major forces, Fatah and Hamas, occurred after the parliamentary elections in Palestine in 2006 when Hamas won.
Fire Prevention Week: Plan two ways out
They reassured students that they needn't be afraid of firefighters even when their uniforms make them look unrecognizable. Go to neighboring residences and call emergency services, and most importantly, never go back inside a burning building .
Thousands of Palestinians took to the streets across Gaza on Thursday in celebration of the unity pact, with loudspeakers on open cars blasting national songs, youths dancing and hugging, and many waving Palestine and Egyptian flags.
Saleh al-Arouri, deputy head of Hamas's influential Political Bureau, also voiced appreciation for the role played by Egypt in sponsoring inter-Palestinian dialogue.
MK Tzipi Livni called the reconciliation talks in Cairo "an opportunity for change", but also called on Hamas to disarm.
Attempts at reconciliation in recent years fell apart. Israel and Egypt imposed a blockade on the territory, severely restricting Palestinians from leaving the territory and goods from entering.
The publicly-released parts of the agreement did not specify what would happen to Hamas' armed wing.
Reconciliation could also pose a dilemma for worldwide efforts to reach an Israeli-Palestinian peace deal since Hamas has not recognised Israel, unlike the Abbas-led Palestine Liberation Organisation.
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