The Israeli government has frozen the handover of West Bank towns to Palestinian control until militant groups are disarmed, officials say.
Militant groups such as Hamas remain a contentious issue
Israel's security cabinet is said to have taken the decision on the advice of Defence Minister Shaul Mofaz.
It came on a day that saw Israeli soldiers shoot dead two Palestinian teenagers in the West Bank.
Israeli Prime Minister Ariel Sharon had agreed to hand over responsibility for security in five West Bank towns.
However, the transfer has so far only taken place in Jericho and Tulkarm.
The handover, agreed at a peace summit in February by Israeli Prime Minister Ariel Sharon and Palestinian leader Mahmoud Abbas in February, was also to have included Qalqilya, Ramallah and Bethlehem.
Mr Mofaz accuses the Palestinians of not fulfilling their commitment to collect weapons from militants in Jericho and Tulkarm since the towns were handed over in March.
The Palestinians say the Israelis are not honouring their commitments.
Israel and its key ally the US, one of the main sponsors of the roadmap peace process, have repeatedly demanded that the Palestinian Authority (PA) dismantle the armed groups.
But the head of the Palestinian Preventive Security Service, Brig Gen Rashid Abu Shbak, told a news conference in the Gaza Strip that there was no intention of withdrawing what he called arms of resistance.
However, he added that weapons should not be displayed in public nor used to settle private feuds.
"We have to work step by step to end all the lawlessness in our society, but at same time, resistance weapons should not be in the streets for no reason," he told reporters.
Last week, Mr Abbas threatened to use an "iron first" against anyone breaking the unofficial truce with Israel.
However, Tuesday saw Palestinian security forces release a Hamas militant whose arrest had sparked tension.
The BBC's Alan Johnston in Gaza says events show that any attempt by the PA to enforce the ceasefire by confronting the powerful, well-armed Hamas movement risks sparking serious unrest.