The Israeli Foreign Minister, Mr David Levy, said yesterday he expected Israel to transfer 5 per cent more of the West Bank to the Palestinian Authority under Mr Yasser Arafat in the coming days.
Asked by Israel Radio if the handover would take place in the next few days, Mr Levy answered: "Indeed, yes."
Mr Levy said a secret, late-night meeting on Tuesday between the Palestinian President and the Israeli Prime Minister, Mr Ehud Barak, had "renewed the trust and co-operation between the two sides".
Israeli and Palestinian negotiators were holding talks later last night on deadlocked issues, including the delayed handover, along with the overdue release of Palestinian prisoners Israel promised to free for the Muslim holy month of Ramadan.
Palestinian officials said they expected that the meeting at a Jerusalem hotel would resolve 13 disputes emanating from a September interim peace accord.
"We really hope to conclude and reach agreement tonight in accordance with the peace accords by agreeing together on the outstanding issues, such as further redeployments from the West Bank and release of prisoners," a senior Palestinian negotiator, Mr Saeb Erekat, said.
Under peace deals since 1993, Palestinians have taken over parts of the West Bank and Gaza Strip, which Israel captured in the 1967 Middle East war. Their negotiators are demanding more densely-populated areas than Israel has offered.
Parallel talks on a final peace have stalled over Palestinian anger at the expansion of Jewish settlements on occupied West Bank land.