Sources close to the negotiations said the Egyptian officials were calling for a unified force under the control of the national security council, not the formation of an army, the Jerusalem Post reported.
"The Palestinians interpreted this as a call to form a national army," a source said.
The Egyptian security team suggested the combined military force Tuesday, during negotiations between Hams and Fatah leaders. The proposal gained immediate support from officials in both political camps, the newspaper said.
"We have always called for the creation of a new security establishment," Hamas spokesman Fawzi Barhoum said. "We want an army that will include members of all the Palestinian factions. This is a positive development."
"We want to see all the security forces united under one command," Fatah spokesman Jamal Nazal said. "We are not opposed to recruiting Hamas members to the Palestinian security forces."