Israeli security forces have told the BBC that soldiers have been ordered not to allow goods to move between Palestinian cities, or to permit Palestinians under the age of 35 to leave Palestinian territories.
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This is new proof that Israel wants to destroy the Palestinian Authority
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Saeb Erekat, Palestinian minister
The measures came in the wake of a double suicide bombing in the Israeli city of Tel Aviv on Sunday, which killed 22 people, as well as two Palestinian bombers.
Earlier, three Palestinian militiamen were killed when Israeli forces raided a refugee camp in the Gaza Strip in a search for militants, Palestinian sources said.
Witnesses said dozens of gunmen clashed with troops after Israeli tanks and armoured vehicles went into the Maghazi camp in the early hours of Tuesday morning.
The army is also reported to have entered the Khan Yunis sector in the south of the strip where several homes were destroyed.
Status revoked
Chief Palestinian negotiator Saeb Erekat said members of the Palestinian Authority (PA) and other Palestinian officials had been banned from moving between cities.
Palestinians accorded VIP status by Israel will now have to apply for special permits to travel.
"This is new proof that Israel wants to destroy the Palestinian Authority," he told French news agency AFP.
He said only children under four months old were allowed out of Palestinian areas.
The new measures come on top of severe restrictions already in place, since Israel took control of the West Bank following a series of deadly bombings in June.
Following Sunday's attack, Israel banned Mr Erekat and other Palestinian officials from attending a conference in Britain on reforming the PA.
The move led to a diplomatic spat between Israeli Foreign Minister Binyamin Netanyahu and his UK counterpart, Jack Straw, while US Secretary of State Colin Powell said he regretted Israel's decision.
Diplomatic row
In a transcript of a telephone exchange published by the Israeli foreign ministry, Mr Netanyahu and Mr Straw accused each other of failing to seek proper partners for peace.
Mr Netanyahu told Mr Straw that the suicide bombings made "business as usual" impossible.
He then urged the UK foreign secretary to adopt the same position as US President George W Bush "that leaders compromised by terror cannot be partners for peace".
Mr Netanyahu added: "You in Britain are doing the exact opposite."
That apparently drew a sharp reply from Mr Straw who is said to have replied: "No, it is Israel that is doing the opposite.
"Instead of concentrating on dealing with terrorism, it is striking at [Palestinian] delegates."