Israeli Prime Minister Ariel Sharon and Palestinian leader Mahmoud Abbas appear to have made little significant progress at a summit in Jerusalem.
It was the first time the two leaders had met in Jerusalem
Mr Sharon offered to hand over two more towns to the Palestinians within two weeks if Mr Abbas demonstrated efforts to control militant violence.
The Israelis said it was a good working meeting and reported some progress.
But the Palestinians expressed disappointment with the summit, saying it had failed to meet expectations.
"This was a difficult meeting," Palestinian Prime Minister Ahmed Qurei told a news conference in the Palestinian city of Ramallah.
"There were no positive answers to the issues we raised," he said, making reference to the reopening of the airport, further releases of Palestinian prisoners in Israeli jails and Jewish settlement expansion in the West Bank.
Ariel Sharon said for his part that he and Mr Abbas had agreed on "full co-ordination" over Israel's exit from Gaza.
The second meeting between the two men since Mr Abbas was elected was overshadowed by the detention of at least 50 Islamic activists in the West Bank.
Israel said they were ordered because the Islamic Jihad group was not observing a truce agreed in February.
Islamic Jihad says its recent attacks were carried out because of Israeli ceasefire violations. Three Israelis died in the attacks.
The BBC's Alan Johnston in Jerusalem says the meeting took place in the worst possible atmosphere.
Even as the summit began, Palestinian witnesses said that an unmanned Israeli plane fired two missiles in the northern Gaza Strip without causing injuries.
Our correspondent says nobody was hurt, but the Israelis could not have sent a clearer message that they regard security matters as the central issue.
The discussions were designed to focus on co-operation over Israel's withdrawal from Gaza, which is to begin in August.
During the meeting Mr Sharon said that preparations for the re-opening of Gaza's airport and harbour could begin.
The opening of the ports is seen as key to reducing Gaza's isolation once Israel pulls out of the coastal territory.
Mr Sharon also offered to hand over the West Bank towns of Bethlehem and Qalqiliya in return for a cessation of militant activity, Israeli officials said.
The officials also said Mr Sharon had offered a number of other gestures in exchange for "quiet": allowing 26,000 Palestinian labourers and 13,000 merchants into Israel to work each day, and keeping crossings between Israel and Gaza open for longer hours.
Mr Sharon also said Israel would allow the return of some deportees to the West Bank and consider releasing more Palestinian prisoners, all in exchange for increased Palestinian efforts to rein in militants, said the officials.
It was the first time Mr Sharon and Mr Abbas had met in Jerusalem - claimed by Israel as its exclusive capital despite Palestinian objections.