The deal, mediated by Egyptian diplomats, came amid a deeper disagreement over an ultimatum by President Mahmoud Abbas to recognise Israel or face a referendum on the idea.
Mr Abbas, who heads Fatah, has given the Islamic group until the weekend to respond.
The black-clad Hamas militia has been at the centre of a brewing power struggle. Hamas deployed the 3,000-member force last month throughout Gaza, sparking violence that has claimed 16 lives.
"They are going to be in places away from the public. They are not going to be visible to people," government spokesman Ghazi Hamad said after the meeting.
Under the arrangement, the militia is to be folded into the official Palestinian police force. Senior officials from both sides, including Prime Minister Ismail Haniyeh of Hamas, joined the day-long talks.
"We agreed on practical steps to guarantee the end of the bloodshed in Palestinian streets," Mr Hamad said.
Hamas agreed to withdraw its force from public view late last month. But within days, the gunmen returned to their positions. After the latest deal was announced, the Hamas force remained in full view.
Power struggle
Mr Abbas has been jostling for power with Hamas since the Islamic group defeated Fatah in legislative elections in January. The feud has revolved around control of the security forces.
With most forces loyal to Fatah, the Hamas government deployed its private militia last month. The militia is commanded by a top militant wanted by Israel and suspected in the deadly bombing of an American diplomatic convoy in 2003.
Abbas has said the Hamas force is illegal but said it could be folded into existing security agencies. More violence preceded the deal.
A senior Fatah-linked police official escaped an apparent assassination attempt when a bomb went off prematurely, injuring an assailant. A day earlier, a pro-Fatah security force base was struck by rocket-propelled grenades. Fatah blamed Hamas for both incidents.
It was not immediately clear whether the sides could use the deal to build momentum and overcome their dispute over a document that calls for implicit recognition of Israel.
Mr Abbas has endorsed the plan for a united Palestinian political platform as a way to end crippling economic sanctions against the Palestinians and allow him to restart peace talks with Israel.
But Hamas spokesman Sami Abu Zuhri hinted that Hamas would resist a referendum by force. "We will not accept the passing of this project no matter what it costs," he said, claiming that the goal of the referendum is to bring down the Hamas-led government.
In unrelated incidents, three Palestinians were killed in clashes with Israeli forces next to the Gaza-Israel border fence, Palestinian security and hospital officials said.
One of the dead was a policeman hit by a tank shell. Five people were wounded, including three police and a child. Israel said soldiers opened fire on suspicious figures approaching the fence.