Israel is to release about 100 Palestinian prisoners and lift some restrictions in the occupied territories, as both sides prepare for next week's US-led summit.
Israel is to ease restrictions on the occupied territories
The goodwill gestures follow "productive" talks in Jerusalem between Israeli Prime Minister Ariel Sharon and his Palestinian counterpart Mahmoud Abbas - more commonly known as Abu Mazen.
The meeting was the first between the two men since Mr Sharon persuaded his cabinet to approve the US-backed peace roadmap.
It comes days before they are due to hold a joint session with US President George W Bush in the Jordanian resort of Aqaba.
The prime minister demanded that his Palestinian colleague take vigorous action to halt terrorism
In an unusual move, Jordan's ambassador to the United States, Karim Kawar, called on Abu Mazen to "wage a war within against [the militant Palestinian group] Hamas and against Jihad al-Islami [Islamic Jihad]".
The BBC's Richard Galpin, in Jerusalem, says Israel clearly wants to take some minor steps to improve the lives of Palestinians before the Bush summit.
Besides the release of a group of prisoners, it is expected the blockade of the West Bank and Gaza Strip will be eased on Saturday night when Palestinians over the age of 28 will be able to move out of their towns.
It is also expected that thousands more Palestinians will be able to return to their jobs in Israel, our correspondent adds.
A statement issued by Mr Sharon's office said the two-and-half-hour meeting in Jerusalem on Thursday night had been held in a "positive and very good atmosphere".
Mr Abbas described the talks as "serious, candid and beneficial", his press secretary said.
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
Both leaders urged each other to take practical steps to peace, with Mr Sharon demanding Mr Abbas begin to crack down on militants as set out in the peace plan.
But there is no agreement yet on the issue of the withdrawal of Israeli troops from parts of the West Bank and Gaza.
Mr Sharon again offered to do this at Thursday's meeting, but Mr Abbas is wary of attempting to crack down on militants before he has secured a ceasefire agreement with the main radical groups, our correspondent says.
In an interview published on Thursday, Mr Abbas said he expected to reach an agreement with one of the militant groups, Hamas, to halt attacks on Israelis.
But a senior Hamas official, Abdel Aziz al-Rantissi, was quoted saying he was not aware any such agreement was planned.
Following Thursday's meeting, Israel named two of the prisoners it will release.
They are Taysir Khaled - a member of the Palestine Liberation Organisation executive committee and a reputed leader of the hardline Democratic Front for the Liberation of Palestine - and Ahmed Jbarra Abu Sukkar, the longest-serving Palestinian prisoner.
Sukkar has been in prison for 27 years for carrying out a bombing.