A suggestion to drop off the formation of a new government would make it less risky for West Bank-based Palestinian President Mahmoud Abbas to pursue reconciliation with the widely shunned Islamic militant Hamas group, which rules Gaza.
The arrangement would bypass the contentious issue of forming an interim Palestinian unity government before elections, tentatively scheduled for May.
The Hamas figure says the understanding was reached in talks last week between Abbas and Hamas chief Khaled Mashaal. He spoke on condition of anonymity because the leaders have not made their decision public.
An Abbas envoy, Azzam al-Ahmed, denied on Saturday that such a deal had been made.