Israel has rejected a call by Palestinian leader Mr Yasser Arafat to enter talks despite receiving the draft report by an international committee that is reported to heavily criticise Israeli incursions into Palestinian territories.
The Palestinian Authority, meanwhile, has accepted the findings of the US-led fact-finding commission on seven months of violence and said the recommendations would help end the conflict.
"The initial reaction of the Palestinian leadership is a positive one. These findings, though not complete, may provide us with a path out of the current crisis," Information Minister Yasser Abed Rabbo told a West Bank news conference.
Israeli officials say Israel, which objected to the commission's establishment, will review the report and prepare a response.
Abed Rabbo said that, despite some shortcomings, the report was a genuine attempt by the international community to help the parties move from occupation and conflict to negotiations and Palestinian statehood.
The five-man commission headed by former US senator George Mitchell was set up to investigate Israeli-Palestinian violence and make recommendations to prevent a recurrence.
At least 405 Palestinians, 76 Israelis and 13 Israeli Arabs have been killed in seven months of violence.
Yesterday, Palestinian President Yasser Arafat called for the reconvening of last October's Sharm el-Sheikh summit - including US President George W. Bush and leaders of Israel and the Palestinians - as well as the commission's members, to discuss ways to implement the findings.
Bill Clinton was president when the commission was set up by the summit in the Egyptian resort. It submitted its report to the sides on Friday but will not publish its findings before May 15, after receiving comments from both sides.
Mr Abed Rabbo and Israeli political sources said the report called on Israel to freeze all Jewish settlement activity, including expansion of existing ones which Israel claims is intended to cater to the settlements' natural growth.
"The report states that the most visible element of Israel's illegal occupation and source of violence is its policy of settlement building on confiscated Palestinian land, which threatens the future of the Palestinian people and their state, and prejudices final status talks," Mr Abed Rabbo said.
Israeli Cabinet Secretary Gideon Saar told Army Radio the demand on settlements ran contrary to the committee's own recommendation that the sides adhere to signed agreements.
"In the agreements, it was never determined that there must be a complete freeze of the settlements, and certainly this is a matter which, based on the agreements, must be settled between the Israelis and Palestinians in the permanent agreement," he said.
Jewish settlements are illegal under international law. Palestinians want them dismantled under a final deal. Leaders of the uprising for Palestinian independence have said settlements are at the core of the conflict.
The other commission members are former Turkish president Suleyman Demirel, Norwegian Foreign Minister Thorbjoern Jagland, former US senator Warren Rudman and European Union foreign policy and security chief Javier Solana.