The Israeli government has ordered its military to reduce its operations in the Gaza Strip, Israeli officials say.
Israel has been trying to stop rocket fire from Gaza
The order comes after a sharp drop in rocket fire from militants in the Palestinian territory.
The Israelis and Palestinian officials from the Hamas faction, which controls Gaza, said no formal ceasefire had been agreed but that talks were under way.
The lull follows a violent period in which at least 120 Palestinians were killed in Israeli military operations.
Four Israelis were killed by Palestinian rockets or in combat operations.
Rocket fire into Israel from Gaza dropped from dozens every day a week ago to a few over the weekend.
Under US pressure, Egypt has stepped up efforts to mediate between the Israelis and Hamas.
A senior Israeli defence ministry official returned on Sunday from talks in Cairo with Egyptian officials, a few days after a similar mission by Hamas officials.
Israel refuses to talk directly to Hamas because the Islamist militant group refuses to acknowledge Israel's right to exist.
Israel's leaders and Hamas politicians have long said that if the other side stops attacking, they will also.
An Israeli air strike which killed five Hamas militants on 27 February was followed by days of rocket barrages from Gaza into Israeli border towns.
The Israeli army launched a series of air and ground attacks into Gaza which killed at least 120 Palestinians - many of them civilians.
There has been no official statement from the Israeli government about the order to scale back military operations in Gaza, but Mr Olmert said he was determined for peace talks with Palestinian Authority President Mahmoud Abbas to continue.
"We will not give up on this effort to make another step - a significant, important, dramatic step - which could bring us closer to the chance of real reconciliation with our Palestinian neighbours, and to the building of the foundations of real peace between us and them," he said at a conference in Jerusalem.
Mr Abbas called off negotiations with the Israelis in response to the Gaza attacks but analysts now say those talks could resume next week.
Since June last year, the Palestinian leadership has been split between Hamas in Gaza and the more moderate Fatah of Mr Abbas in the West Bank.
Mr Abbas and Mr Olmert have been engaged in peace talks launched by the US last November with the goal of establishing an independent Palestinian state by the end of the year.