Both sides are urging each other to take steps towards peace
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Israel has eased restrictions on Palestinians in the occupied West Bank and Gaza Strip ahead of a three-way summit with US President George W Bush.
The Israeli army said the total closure of the territories was lifted at midnight local time (2100 GMT Saturday), allowing about 25,000 Palestinians with work permits to return to their jobs in Israel.
Some of the restrictions on Palestinian fishermen working off the Gaza coast are also to be eased, and there are plans to release about 100 Palestinians held in Israeli jails.
However, the Israeli army said it would remain in its positions in the West Bank and Gaza and the closure could be quickly reimposed if Israel feels the security situation demands it.
These are definitely actions meant to create a new atmosphere
Israeli Deputy Defence Minister Zeev Boim
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The Israeli move is seen as a goodwill gesture three days before President Bush is due to meet the Israeli and Palestinian prime ministers in Jordan to discuss the US-backed international peace plan for the Middle East, known as the roadmap.
It follows talks between the Israeli Prime Minister, Ariel Sharon, and the Palestinian Prime Minister, Mahmoud Abbas - better known as Abu Mazen - on implementation of the roadmap.
"These are definitely actions meant to create a new atmosphere," Israeli Deputy Defence Minister Zeev Boim told the Israeli army radio.
But after Abu Mazen expressed confidence that he could secure a ceasefire with Palestinian militants, the hardline Islamic group Hamas vowed to continue its attacks unless Israel made substantial concessions.
'Good atmosphere'
Thursday night's meeting between Mr Sharon and Abu Mazen was the first between the two men since Mr Sharon persuaded his cabinet to approve the US-backed peace plan.
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ROADMAP MAIN POINTS
Phase 1 (to May 2003): End to Palestinian violence; Palestinian political reform; Israeli withdrawal and freeze on settlement expansion; Palestinian elections
Phase 2: (June-Dec 2003) Creation of an independent Palestinian state; international conference and international monitoring of compliance with roadmap
Phase 3 (2004-2005): Second international conference; permanent status agreement and end of conflict; agreement on final borders, Jerusalem, refugees and settlements; Arab states to agree to peace deals with Israel
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During the two-and-half-hour meeting in Jerusalem, both leaders urged each other to take practical steps to peace.
Mr Sharon has demanded that Abu Mazen begin to crack down on militants as set out in the roadmap.
However, Abu Mazen is wary of attempting such a move before he has secured a ceasefire with the main radical groups, our correspondent says.
In an interview with Israeli public television, Abu Mazen said he expected to reach agreement with all militant groups and factions within the next two to three weeks.
"I am an optimist. We will achieve an agreement on a halt in the violence," he said.
But Hamas has said it will only stop its suicide attacks if Israel halts all "aggression" against the Palestinians.
"There is a price to everything, stopping our martyr operations and attacks against (Israeli) civilians cannot occur without the enemy paying the price and stopping its aggression in all its forms," top Hamas official Abdelaziz Rantissi told the AFP news agency.