Restrictions imposed on Palestinians in the occupied West Bank and Gaza Strip are being eased tonight, the Israeli army has said.
Both sides are urging each other to take steps towards peace
A statement released by the army said the Israeli Government had approved the lifting of the closure of the occupied territories to begin at midnight (2100 GMT).
It follows what were described as positive talks between the Israeli Prime Minister, Ariel Sharon, and the Palestinian Prime Minister, Mahmoud Abbas, on implementation of the so-called roadmap to peace.
It also comes as both leaders are due to hold a joint session with US President George Bush next week in the Jordanian resort of Aqaba.
The army said Israeli forces would remain in the West Bank and Gaza Strip, but 25,000 Palestinians with permits would be allowed into Israel to work each day, Reuters news agency reported.
Meanwhile the militant group Islamic Jihad said it had "no intention of attacking the American people and do not consider the American people our enemy".
The statement came in response to a warning from the US embassy in Tel Aviv on Friday, in which it said it had received "credible reports" of plans to kidnap US citizens in the Gaza Strip.
On Friday, Israel put on hold the planned release of 100 Palestinian prisoners, saying only that the situation would be reviewed over the weekend.
Meanwhile, as Mahmoud Abbas - also known as Abu Mazen - expressed confidence that he could secure a ceasefire by Palestinian militants, the hardline Islamic group Hamas vowed to continue its attacks unless Israel made substantial concessions.
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.
During the two-and-half-hour meeting in Jerusalem, both leaders urged each other to take practical steps to peace.
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
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 to crack down on militants before he has secured a ceasefire agreement 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 Abelaziz Rantissi told French news agency AFP.