Israel today approved a troop pullback from West Bank cities and the release of 900 Palestinian prisoners, measures crucial to the success of a summit with the Palestinians in Egypt next week.
Palestinian President Mahmoud Abbas speaks to reporters today in the West Bank city of Ramallah
Both sides said they hoped to declare a formal halt to violence at the talks in the Red Sea resort of Sharm el-Sheikh next Tuesday, which will mark a dramatic return to peacemaking after more than four years of bloodshed.
However, this evening Palestinian gunmen opened fire and threw grenades at an Israeli military vehicle in the southern Gaza Strip, wounding a soldier, an Israeli military source said. Jewish settlers said soldiers returned fire and killed one Palestinian gunman.
US President George W. Bush yesterday pledged $350 million in aid to the Palestinians to bolster security and economic development, and said the goal of Palestinian statehood was "within reach".
As part of a confidence-building package to be presented at the summit, Israel will carry out a phased military pullback from positions around five Palestinian cities in the West Bank and free 900 prisoners, cabinet officials said.
Prime Minister Ariel Sharon and top cabinet ministers approved the steps at a 4 1/2-hour meeting in Tel Aviv. Palestinians jailed for causing the deaths of Israelis will not be included in the release, the officials said.
A first batch of 500 prisoners will be freed next week, after the summit, with 400 more to follow over three months. Palestinian president Mr Mahmoud Abbas hoped the first group would include prisoners who had served long sentences.
The release of some 8,000 prisoners held by Israel is key to attempts by Mr Abbas to consolidate power, end bloodshed and revive a US-backed peace "road map" after the death of Yasser Arafat.
Troops will pull back from the West Bank city of Jericho after the summit then withdraw, over two-week intervals, from areas around Tulkarm, Bethlehem, Qalqilya and Ramallah.
In addition, an Israeli-Palestinian committee will be formed to agree a list of militants who will be struck off Israel's most-wanted list in return for a halt to attacks on Israelis.
Israel insists it will not join a formal ceasefire but will meet restraint with restraint.
"I hope there will be an official declaration of an armistice, on the cessation of all acts of violence," Vice Premier Shimon Peres said on Army Radio.
"We hope to God this (declaration) will happen," Mr Abbas told reporters.
The summit, hosted by Egyptian President Hosni Mubarak and attended by Mr Sharon, Mr Abbas and Jordan's King Abdullah, will aim to extend the lull in violence by embarking on mutual steps charted by the road map towards Palestinian statehood.
In a sign that the United States is stepping up its involvement, new secretary of state Dr Condoleezza Rice will meet Mr Sharon and Mr Abbas separately in the region next week.