Hamas and seven other Damascus-based Palestinian factions issued a joint statement saying the reconciliation plan must be revised to include a reference to the Palestinian right to resist Israeli occupation.
"The wording submitted by Cairo to the factions makes no reference to the struggle (with Israel) and the aggression against our people," the statement said, adding the groups wouldn't sign the proposal unless it's amended.
Hamas, a bitter rival of Palestinian leader Mahmoud Abbas' Fatah group, seized control of Gaza two years ago after routing out Fatah forces. The Palestinians have since had two rival governments, with Hamas in control of Gaza, while the Western-backed Fatah governs the West Bank.
Egypt has been trying to mediate between the Palestinians, in a prelude to wider Mideast peace efforts that would include a peace deal with Israel.
Fatah on Wednesday said it has accepted the Egyptian proposal to hold presidential and legislative elections next year as part of a broad package meant to end the bitter rivalry with Hamas, which has complicated U.S.-led efforts to forge peace between Israel and the Palestinians.
Fatah says it signed the proposal and dispatched an envoy to Cairo with the response Thursday.
Under the proposal, the Palestinians would hold presidential and legislative elections on June 28.
In the meantime, Hamas would allow some 3,000 Fatah loyalists to return to duty in the security forces in the coastal Gaza Strip. Monitoring committees would work toward establishing a unified Palestinian security force for Gaza and the West Bank, while the rival sides would form a separate committee to work together to prepare for the elections.
The Egyptian proposal has failed to address some key issues in the dispute — most importantly whether a unified Palestinian government would accept international demands to renounce violence and recognize Israel's right to exist.
Hamas' refusal to recognize Israel was a major point of friction in a short-lived Palestinian unity government that disintegrated during the Gaza infighting.
Hamas' top leaders live in exile in Syria because of fears of assassinations by Israel in the coastal area. The group's officials in Gaza made no immediate comment on the Damascus statement.
There was also no word from Fatah in the West Bank, although the mainstream group threatened earlier Thursday to call an election before Jan. 25 if Hamas doesn't sign the Egyptian proposal.