Palestinian leader Mahmoud Abbas and Israeli Prime Minister Ariel Sharon have accepted an invitation to attend a summit in Egypt next Tuesday.
Palestinian forces train to take over in West Bank towns
The meeting, hosted by President Hosni Mubarak and due to take place in Sharm el-Sheikh, will also be attended by King Abdullah of Jordan.
It will be the highest-level talks since Mr Sharon, who shunned the late leader Yasser Arafat, came to power.
The announcement comes as the head of Egyptian intelligence visits Israel.
Egypt has taken on a key role in assisting Israel's plan to withdraw unilaterally from the Gaza Strip and is helping with security arrangements.
Both Mr Abbas and Mr Sharon have spoken of an "historic opportunity" to make progress in the peace process, following the death of Mr Arafat.
The two leaders met on several occasions in the summer of 2003 during Mr Abbas's brief spell as prime minister, including at the launch of the international peace plan known as the roadmap at Sharm el-Sheikh.
Freeze on pursuits
Earlier on Wednesday, Israel said it might suspend its pursuit of wanted Palestinian militants as a goodwill gesture towards Mr Abbas's leadership.
Defence official Amos Gilad said it was a "freeze not an amnesty" lasting as long as militants laid down their arms.
Mr Gilad said a Palestinian-Israeli committee was planned to deal with the issue and could meet next week.
"We will give Abu Mazen [Mr Abbas] a chance by suspending our operations against the wanted Palestinians, but this is a freeze not an amnesty," Mr Gilad told army radio.
"If these wanted Palestinians start up their terrorist activities again, we will resume our offensive operations against them," he added.
About 300 Palestinians are thought to be on Israel's wanted list. In the past four years of violence, hundreds of suspected militants - and smaller number of bystanders - have been killed in what Israel terms targeted killings.
Correspondents say the fate of fugitives is one of the most sensitive issues in current truce talks between Israel and the Palestinian Authority.
Israel's security cabinet is expected to meet on Thursday to approve a series of gestures toward the Palestinians, including prisoner releases and a gradual troop withdrawal from several towns in the West Bank.
Palestinian security forces have destroyed a weapons smuggling tunnel under the Gaza-Egypt border, in another sign Mr Abbas is serious about stopping anti-Israeli violence.
Condoleezza Rice will make her first trip to the region as US secretary of state next week, to encourage the two sides to make progress on the roadmap.
Jewish settlers are determined not to be removed from occupied land
Israel's military administration in the West Bank meanwhile says Jewish settlers are continuing to build in four illegal West Bank outposts scheduled to be removed.
So far only a few such outposts have been removed, which is an obligation for Israel under the terms of the roadmap.
Israel put the brakes on its planned West Bank pullout after a day of violence on Monday, which was triggered, Palestinians say, by the killing of a Gaza schoolgirl by Israeli troops.
Israel says stray bullets fired by Palestinians may have caused the fatality.
Israel captured the West Bank and the Gaza Strip - home to about four million Palestinians - during the 1967 Six Day war.
It plans to pull out all 8,000 Israeli settlers and the troops who protect them from 21 fortified enclaves in Gaza by the end of 2005, but its military will keep control of Gaza's borders, coastline and airspace.