The Israeli cabinet has met to decide their policy now that the militant group Hamas is about to assume control of the new Palestinian administration.
Israel will not deal with Hamas unless key demands are met
The cabinet had been expected to decide on Friday on defence ministry proposals to impose further restrictions on the movement of Palestinians.
But officials said the recommendations will be voted on by the full Israeli cabinet by Sunday at the earliest.
Hamas won a majority in the Palestinian parliamentary elections in January.
Israel says it will not deal with the Islamist militant group unless it renounces violence and recognises the state of Israel.
Hamas has so far rejected demands that end its "armed struggle" or recognise Israel, but it is observing an informal truce with Israel.
The cabinet, chaired by acting Prime Minister Ehud Olmert, met on Friday to discuss what approach it should take if Hamas assumes control of the Palestinian Authority after the inaugural session of the Palestinian Legislative Council on Saturday.
The Defence Ministry has suggested turning the Gaza-Israel crossing-points into international borders.
This could lead to tougher security checks and restrict the movement of Palestinians.
Another option is stopping the transfer of millions of dollars worth of taxes which Israel collects on behalf of the Palestinians.
A spokesman for the Israeli foreign ministry told the BBC that Israel's policies towards Hamas were shared by the international community at large.
"The idea is to induce them to make the right choices. This isn't just Israel's position," Mark Regev said.
"I think everyone in the international community has a problem with giving financial support to a regime, an unreformed Hamas, which supports terrorism and believes my country should be wiped of the map."
But Ismail Haniya, one of Hamas' leaders in Gaza, said the measures would amount to collective punishment.
"Hamas reflects the choice of our people, who will not be broken by a few measures taken by the Israeli occupiers," he said.
"The Israeli occupier must recognise the rights of our people and respect the rules of the democratic game."
Hamas 'names PM'
While Israel considers its approach, reports suggest Hamas has chosen Mr Haniya, one of its leaders in Gaza, to be the next prime minister.
Hamas has yet to make a formal announcement of the nomination.
Mr Haniya told Reuters that no decision had been made.
"Nothing official has been reached so far, and when a decision is made, it will be published, " he said.
Hamas leaders plan to appoint a cabinet within a fortnight of the parliament's first session.
An inaugural session of the Palestinian Legislative Council is due to be held on Saturday.