The envoy of the Quartet of Middle East peace negotiators, Tony Blair, has announced a series of economic projects to help boost the Palestinian economy.
Tony Blair described the economic projects as a "strong beginning"
Mr Blair unveiled four major projects, including a sewage treatment plant in Gaza, an industrial park in Jericho and an industrial zone in Hebron.
The former UK prime minister warned that without the hope of prosperity, politics would never succeed.
His announcement comes a week before a peace conference in the US.
Earlier, the Israeli government approved the release of 450 Palestinian prisoners and reiterated its pledge to freeze new settlements in the West Bank and dismantle unauthorised settlements.
A senior Israeli official said it was a goodwill gesture ahead of the peace conference.
Speaking to reporters in Jerusalem with the Palestinian prime minister and Israeli defence minister, Mr Blair announced four major industrial and business projects aimed at revitalising the Palestinian economy.
The Quartet's envoy said an emergency sewage treatment project would help prevent the collapse of the sewerage system which serves 200,000 people in the town of Beit Lahiya in the northern Gaza Strip.
In March, at least five people were killed in a nearby village when a sewage treatment pool burst.
Mr Blair also unveiled plans for the Jericho Agro-Industrial Park in the West Bank, which will help Palestinians export goods to the European Union, and a Turkish-backed industrial zone in Hebron. Both are designed to create local jobs, he said.
Finally, he announced an economic package to help increase tourism in Bethlehem.
"It is a strong beginning for what is a critical part of this process, because without hope of prosperity and a rise in living standards and giving people an economic stake in the future... then politics will never succeed," he told reporters.
"In the end, all these aspects are linked - the political vision, the building of the capacity for Palestinian statehood, the actual facts on the ground - the economic facts of what is happening," he added.
The BBC's Katya Adler in Jerusalem says the projects are not new, but what is different is that Mr Blair has the support of Israel.
In the past, Israel has cited security concerns for blocking business initiatives and for restricting the movement of goods and workers in and around the Palestinian Territories, our correspondent says.