The home affairs minister has urged closer co-operation with the Heung Yee Kuk after the rural body said it might form a party to contest the 2016 Legislative Council election.
But political analysts differed over whether the kuk's move would further split the pro-government camp.
Speaking at the kuk's spring reception, Secretary for Home Affairs Tsang Tak-sing said: "The government and the Heung Yee Kuk have been close partners, and as we face both great opportunities and complicated challenges, there's a greater need … to look at the big picture and eliminate conflict.
"I hope we will continue to co-operate smoothly, to work for development in the New Territories as well as Hong Kong's overall interest."
The relationship between the kuk and the government has soured over several initiatives that threaten villagers' interests.
They include a possible threat to the small-house policy and a plan to extend the Tuen Mun landfill.
But failed chief executive candidate Henry Tang Ying-yen, also speaking at the reception, said the kuk would not hurt unity by setting up a party.
"I don't think this is a split," Tang said. "In a political spectrum, different parties can try different ways. Any organisation interested in politics should form its own party."
Tang said a new party would not have a big effect on other pro-establishment groups' share of the vote because "there are many voters in the New Territories".
Rita Fan Hsu Lai-tai, a member of the National People's Congress Standing Committee who supported Tang, also played down fears.
"Sometimes if you have a party, it's easier to co-ordinate and plan a campaign," Fan said.
"Lau Wong-fat said he fully supports the government," she added, referring to the kuk chairman.
Lau yesterday renewed the kuk's support for the government in a speech at the spring reception. He said the kuk would not "turn a blind eye" to the "provocative" Occupy Central movement, which threatens to block roads in the business district as a last push for democracy.
Lau also said the kuk had to consider "how to strengthen its power, progress with the times and do the right thing".