Taking a hard line after Israel's pullout from Gaza last month, Prime Minister Mr Ariel Sharon has said the Palestinians must wage a "real war on terror" before peace talks can resume.
Addressing the opening of the first parliamentary session after a weeklong surge of Israeli-Palestinian violence, Mr Sharon said the Jewish state was ready to do its part for peace.
But he reiterated in strong language a demand that the Palestinian Authority first take action against armed groups.
"The demand for the Palestinians to wage a real war on terror cannot be circumvented," Mr Sharon said in his "state of the nation" speech. "Israel has already proven its readiness to make painful concessions. Now, we demand to see real action by the Palestinian Authority and Palestinian people on the road to genuine peace."
The Palestinians have accused Israel of stoking the latest fighting. The flare-up has further undermined an already shaky eight-month-old truce and dampened peace hopes rekindled by Israel's withdrawal from Gaza after 38 years of occupation.
On Sunday, Israeli troops killed three Islamic Jihad militants in the West Bank, the army said, hours after the organization agreed to halt rocket attacks from Gaza.
Islamic Jihad killed five Israelis in a suicide bombing in Israel last Wednesday, and its rocket attacks led to Israeli airstrikes last week that killed nine Palestinians, mostly gunmen.