Monday's announcement of the new "unity fund" marks another step in the reconciliation process between the rival Palestinian governments in the West Bank and Gaza. The sides agreed this month to end a four-year rift and are now in the process of forming a joint government.
The new fund is being headed by the West Bank-based Palestinian Investment Fund. Its director, Mohammed Mustafa, says the cash will go to housing, energy and transportation projects.
He says he hopes to raise an additional $800 million from private Arab investors.
Gaza's infrastructure was heavily damaged during an Israeli military offensive against Palestinian militants two and a half years ago.