Recent votes in the Israeli parliament have removed the final legislative barriers to Prime Minister Ariel Sharon's plans to withdraw soldiers and Jewish settlers from the Gaza Strip and a small portion of the West Bank. Political analysts say a successful Israeli pullout combined with a continued commitment by Palestinian leaders to democratic elections and political reform could revive the peace process and help spread democracy in the greater Middle East.
The Israeli government has given about 8,500 Jewish settlers in Gaza until late July to leave voluntarily in exchange for compensation payments.
After that deadline, thousands of soldiers and police are expected to move in and remove the remaining settlers by force.
Dismantling the settlements is considered a major challenge because it sets the stage for Jews evacuating Jews from territory some consider part of the biblical land of Israel.
President Bush supports the withdrawal plan and sees it as a step toward a lasting peace and an end to years of violence.
"Israel must withdraw from the settlements," the president said. "There must be contiguous territory into which a Palestinian state can grow. The Palestinians for their part must continue to work hard to fight any terrorist activities within the territories, and the Arab world must continue to work together to help Palestine build the necessary structures for democracy."
Earlier this year Palestinians elected Mahmoud Abbas as President and will choose members of a new parliament in July.
A former U.S. Ambassador to Israel, Martin Indyk, says elections in the West Bank and Gaza are setting a good example for other countries in the region.
"If you want to promote democracy in the Middle East a very good place to start is in Palestine, not just because they do have a robust civil society and because in the years of kleptocratic rule, tyrannical rule by Yasser Arafat, they have come to want representative government and accountable government," he said. "During all those years of Israeli occupation they learned about democracy, they have learned about the value of an independent judiciary because they can appeal to the Israeli Supreme Court to constrain the policies of the Israeli government."
Tamara Wittes is a specialist on political and economic reform in the Arab world with the Saban Center for Middle East Policy at the Brookings Institution.
Ms. Wittes says Arab countries are closely watching the democratic process unfold in the Palestinian territories.
"The fact that the Palestinians were able to have meaningful elections, that they are going to be having more over the coming months, that they are struggling with the issues of corruption, the role of the security services, one party domination of politics, this has clear resonance for people elsewhere in the region," she said.
Shibley Telhami is the Anwar Sadat Professor for Peace at the University of Maryland and frequently conducts surveys of Arab attitudes in the Middle East.
Mr. Telhami says progress on the Arab-Israeli conflict will go a long way in advancing U.S. policy and priorities in the region.
"While the question of terrorism is our prism of pain in relation to the region, the question that we would like the region to focus on, we must recognize they have their own prism of pain and that terrorism is not their prism of pain," said Shibley Telhami. "It is clear that they see the United States and they evaluate the United States, largely in relation to policy questions that matter to them, above all the Arab-Israeli issue."
Former U.S. Ambassador to Israel, Martin Indyk, says the Bush administration needs to strengthen efforts to seek support for Palestinian reform among Arab countries.
Mr. Indyk says the administration should appoint an envoy to oversee efforts to bring about change in the Israeli-Palestinian relationship.
"We need to make a much more serious and effective effort to get the Arab states involved in this process," he said. "All of this cannot be done by a secretary of state who has a huge agenda. There needs to be a special Middle East envoy and the failure to generate that move, the belief that that can be put off until later, is, I believe, a fundamental mistake."
After 4.5 years of bloodshed, the Palestinians have agreed to a tentative cease-fire with Israel.
The militant Palestinian group Hamas has also agreed to take part in the July legislative elections, which could carry the truce through the Israeli withdrawal scheduled for the same month.
Successful elections and a coordinated Israeli evacuation may set the stage for revival of the Road Map, a peace plan that sets a series of benchmarks designed to lead to creation of a Palestinian state that exists in harmony with Israel.