In an opening speech, Prime Minister Rami Hamdallah renewed his pledge to end a decade-long split between the Islamist Hamas movement that controls Gaza and his West Bank-based government.
"We are here to turn the page on division, restore the national project to its correct direction and establish the (Palestinian) state," he said.
The session took place at the official Gaza residence of Palestinian president Mahmud Abbas in the cabinet office, hung with portraits of Abbas and historic Palestinian leader Yasser Arafat.
It was the first meeting of the cabinet in Gaza since November 2014, although Hamdallah visited a year later without his ministers.
Hamas ousted the PA from Gaza after bloody street fighting in 2007, but finally agreed last month to its return, under pressure from the territory's powerful neighbour Egypt.
A visiting Egyptian official told AFP that his country's intelligence chief, Khaled Fawzi, was expected to meet Hamas leader Ismail Haniya in Gaza later on Thursday.
UN Middle East envoy Nickolay Mladenov said on Monday that he was "carefully optimistic" about the reconciliation talks.
"If the region stays engaged if Egypt's role continues and if the political parties themselves continue to show the willingness they are currently showing to work with us on this process, then it can succeed," he told.