Palestinian militants carried out an intense campaign of attacks in the first three months of the year, including a hotel bombing which killed 29 on the eve of the Jewish Passover holiday.
In response, Israel besieged Yasser Arafat in his Ramallah compound for five weeks and sent tanks and thousands of troops to re-occupy almost all of the West Bank.
Months of curfews and closures followed as Israel carried out operations it said were aimed at destroying the Palestinian terrorist infrastructure.
Controversy raged as Israeli forces entered and captured the West Bank city of Jenin in April. A UN report later refuted Palestinian claims of a massacre, but Amnesty International concluded that the Israeli army had committed war crimes in Jenin and also Nablus.
May saw a five-week stand-off between the Israeli army and a large group of militants and civilians sheltering inside Bethlehem's Church of the Nativity.
In June, US President George Bush called for Palestinians to replace their leader with one not "compromised by terror", and outlined a timetable for negotiations which would later become the plan known as the "roadmap".
Israel began building a barrier in the West Bank, which it said was to prevent attacks inside Israel, although Palestinians feared an attempt to annex land.
Mr Arafat faced heavy pressure to reform the Palestinian Authority and rein in the militants.
Palestinian attacks continued, met with periodic Israeli incursions and a ten-day siege which reduced much of Mr Arafat's compound to rubble.