Turkey, Iraq and the US have all taken steps to combat the threat of Kurdish fighters based in northern Iraq and defuse the crisis in the region.
Turkey has massed about 100,000 troops near the Iraq border
The Turkish government has announced economic sanctions against groups which support those responsible for a recent upsurge in attacks on Turkish soldiers.
The move came after Baghdad announced more checkpoints to curb the activities of the Kurdistan Workers' Party (PKK).
The US also said it was giving Turkey intelligence on PKK positions in Iraq.
Washington has urged the Turkish government to find a diplomatic solution to the crisis on its south-eastern border, where it has deployed thousands of troops and threatened to launch cross-border attacks.
On Thursday, Turkish Foreign Minister Ali Babacan said that any military action "would be aimed at hitting terrorist bases and would not be an invasion".
Mr Babacan said a planned meeting on Monday between Prime Minister Recep Tayyip Erdogan and US President George W Bush would "determine the steps that Turkey would take".
Following a cabinet meeting on Wednesday evening, Turkish Deputy Prime Minister Cemil Cicek said his government had initiated "military, political diplomatic measures" to combat the PKK.
"The targets of these measures are the terrorist organization and those groups which are supporting, aiding and abetting it," he said.
TURKEY- IRAQ TRADE
Bilateral trade between Turkey and Iraq worth $3bn in 2006
Turkish construction companies won $4bn of contracts
Turkey exported $2.7bn of goods to Iraq
Majority of trade takes place in northern Iraq due to poor security situation in the South
Mr Cicek gave no details of the economic measures, but correspondents say they may result in a boycott of the autonomous Kurdistan Regional Government in northern Iraq, which Ankara says is failing to rein in the activities of the PKK.
The territory receives food imports from Turkey, as well as investment and electricity supplies.
Mr Cicek said Turkey would avoid making innocent people on either side of the border suffer hardship as a result of the "precautions".
Cross-border trade and Turkish construction contracts in northern Iraq are worth billions of dollars a year. Hundreds of thousands of people in the largely Kurdish south-east of Turkey are thought to make some kind of living through the trade.
The BBC's Pam O'Toole says Ankara will therefore be aware that if it takes drastic measures against the Iraqi Kurds, it could also hurt its own citizens, and possibly fan radical Kurdish sentiment on Turkish soil.
Earlier, the US Department of Defence said it had stepped up supplying Ankara with "actionable intelligence" on the positions of PKK fighters in northern Iraq.
Formed in late 1970s
Launched armed struggle in 1984
Dropped independence demands in 1990s
Wants greater autonomy for Turkey's Kurds
Leader Abdullah Ocalan arrested in 1999
Ended five-year ceasefire in 2004
Called a terrorist organisation by Turkey, the EU and US
Pentagon spokesman Geoff Morrell said the US had given Turkey "intelligence with regards to this situation for a long time".
"We are assisting the Turks in their efforts to combat the PKK by supplying them with intelligence, lots of intelligence," he added.
"The key for any sort of military response from the Turks or anyone else is having actionable intelligence and that's a pretty high standard, and we are making efforts to help them get actionable intelligence."
No details were given of how the information is collected but reports suggest American-manned U2 spy planes have been flying over the Turkish-Iraqi border.
Last week, US Defence Secretary Robert Gates said his country and Turkey needed better intelligence about the location of PKK fighters in northern Iraq before launching any military strikes.
The Iraqi government says that it too is acting against the PKK.
Foreign Minister Hoshyar Zebari - a Kurd - said checkpoints along the border with Turkey were being set up to cut off the PKK's supply lines.
Iran and Iraq have agreed to curb the activities of Kurdish rebels
He added that he had not given up hope of a peaceful solution to the problems.
Mr Zebari's comments came after he met his Iranian counterpart, Manouchehr Mottaki, for talks in advance of a conference about Iraq on Saturday in Istanbul.
The meeting, bringing together Iraq's neighbours with major international powers and institutions, is aimed at bolstering the country's security and stability.
Afterwards, both men stressed that the border tensions in northern Iraq should not be allowed to dominate the conference.
But correspondents say the tensions clearly loomed large in the talks.
The two men agreed that the activities of the PKK against Turkey, and those of another Kurdish group, Pejak, against Iran, had to be curbed.
The BBC's Nick Childs says the key governments involved in this crisis are anxious to be seen to be taking some sort of action at this stage.
Whether any of it actually amounts to significant progress towards solving the dispute is another matter, our correspondent says.