Hamas, in a sign of reconciliation with Fatah, permitted the rally to go ahead as the climax of a week of Gaza festivities celebrating the 48th anniversary of Fatah taking up arms against Israel.
Demonstrators waved Palestinian and Fatah flags and carried pictures of Abbas, an AFP correspondent reported.
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"This crowd is a vote in favour of (Abbas's) Palestinian Authority and shows that Fatah is still out in front," local Fatah leader Selim al-Zaraei told AFP.
The centrepiece of the event was to be a speech by Abbas from his West Bank headquarters in Ramallah, beamed to the Gaza crowd on giant screens.
Fatah Gaza spokesman Fayez Abou Eita told AFP ahead of the speech: "Hundreds of thousands of people are currently taking part in the public festivities."
Abbas's address was to be followed by a speech by senior Fatah official Nabil Shaath, who travelled to Gaza from the the West Bank for the event.
He was to be followed by Hamas official Rawhi Mushtaha, who was to speak in the name of all the Palestinian factions.
Several thousand supporters gathered at the beginning of the festivities on Monday night at the Saraya complex in Gaza City, holding pictures of late Palestinian leader Yasser Arafat and Abbas, and waving Fatah flags as fireworks went off.
Similar events took place across the Gaza Strip.
Hamas and Fatah had been at loggerheads since the Islamist movement seized control of Gaza in June 2007, following its victory in Palestinian parliamentary elections the previous year.
But under Egyptian mediation, the two groups reached a unity agreement in April 2011, although it has so far not been implemented.
The anniversary commemorates the first operation against Israel claimed by Fatah's armed wing, then known as Al-Assifa (The Thunderstorm in Arabic), on January 1, 1965.
