Israel is beginning to send army reservists home today after the scrapping of an assault on the Palestinian-ruled Gaza Strip that had been undermined by diplomatic pressure and dissent from generals.
On the political front, Israeli Prime Minister Ariel Sharon faced a showdown with his rival Mr Benjamin Netanyahu at a Likud party meeting later in the day over the question of a Palestinian state.
Army Radio said the military would start to demobilise reservists who had been called up on Thursday to prepare for an assault on militants in the Gaza Strip after a suicide bomber killed 15 Israelis near Tel Aviv on Tuesday.
Israeli military affairs correspondents, who are briefed regularly by senior officers, had reported that some generals had opposed a Gaza operation, warning of heavy Israeli army and Palestinian civilian casualties in the Strip.
Senior political sources said the offensive had been shelved because details had been leaked to the media.
However, a government source claimed the real reason was Israeli fear of diplomatic fallout so soon after a sweep through the West Bank.
Israel has been urged by US and other foreign leaders to eschew another military thrust to avoid burying new diplomacy, including a US initiative for a conference on peacemaking.
With a Gaza strike now on the back burner, Mr Sharon faced a different fight at a meeting of his Likud party's central committee in Tel Aviv.
Supporters of his strongest party challenger, Mr Netanyahu, have threatened to push through a resolution declaring the Likud would never support the creation of a Palestinian state. Mr Sharon has said he envisions a Palestinian state at the end of a long peacemaking process.
Diplomats said the shelving of a Gaza strike was a welcome extension to Friday's resolution of an Israeli siege that lasted more than five weeks at Bethlehem's Church of the Nativity.
Israeli commentators said a Gaza sweep could have caused friction with Washington at a time when US President George W. Bush has joined Mr Sharon in urging reforms in the Palestinian Authority. Both men met at the White House last Tuesday.