Palestinians split over local election call

* Fayyad gov't sets date for municipal elections

* Hamas says Fayyad not legitimate, cannot call vote

* Fatah says will take part

RAMALLAH, West Bank, Feb 8 (Reuters) - The West Bank-based Palestinian government on Monday called local elections for July in a move the Hamas Islamist group said was illegitimate.

Prime Minister Salam Fayyad's cabinet decided to hold the municipal elections on July 17. The Fatah movement, which is represented in Fayyad's government in the West Bank, welcomed the move and said it would take part.

Hamas, which controls the Gaza Strip, said Fayyad and his government were illegitimate and not in a position to call a vote. Any elections could only take place after national reconciliation, spokesman Fawzi Barhoum told Reuters.

Hamas and Fatah have been in a state of open hostility since 2007, when the Islamist group seized control of the Gaza Strip.

Legislative and presidential elections called in January by Palestinian President Mahmoud Abbas, the leader of Fatah, were cancelled due to a ban by Hamas on participation in the Gaza Strip.

An Egyptian plan aimed at ending the Palestinian division set legislative and presidential elections for June. Fatah leader Abbas, who is supported by Cairo, signed the document. Hamas has refused to, citing reservations.

The Palestinians last held local elections in 2005, shortly before a legislative election in which Hamas defeated Fatah -- an outcome which ultimately led to the deep Palestinian national division. (Reporting by Tom Perry in Ramallah and Nidal al-Mughrabi in Gaza; Editing by Angus MacSwan)