The Israeli and Palestinian Prime Ministers are scheduled to meet later Saturday to discuss a possible cease-fire agreement that would end nearly three years of bloodshed.
The talks between Israeli Prime Minister Ariel Sharon and his new Palestinian counterpart Mahmoud Abbas represent the highest level contacts between the two sides in more than two years.
Israeli officials say Mr. Sharon is prepared to offer a temporary ceasefire and a phased withdrawal of Israeli troops from Palestinian self-rule areas, starting in the Gaza Strip.
Responsibility for law and order would then be transferred back to the Palestinian security services, which would be expected to make a concerted effort to halt violence and terrorism.
Palestinian officials say that the new Palestinian Security Minister, Mohammad Dahlan, who will also take part in Saturday's talks, is ready to assume responsibility for Gaza.
If the plan succeeds in Gaza, Israeli troops would then start to pull-back from areas of the West Bank, including Jericho and Bethlehem. Israeli troops were sent into areas of the West Bank and Gaza Strip last year, following a wave of Palestinian suicide bombing attacks. Mr. Sharon insists that the soldiers need not stay, if the Palestinian Authority is willing to halt attacks by Palestinian militants.
For his part, Mr. Abbas is expected to demand assurances from the Israelis that they are willing to start implementing the U.S. backed peace plan that has been presented to the two sides. The so-called "road map" is supported by the United States, Russia, the European Union and the United Nations. It calls for an end to the Israeli-Palestinian conflict and the establishment of a Palestinian state by 2005.
The meeting will be the first test of Mr. Abbas' leadership, since being sworn as the first Palestinian Prime Minister.
At the same time, Mr. Abbas is also facing an internal crisis within his own Cabinet, following the resignation of Saeb Erekat, the minister who has been responsible for peace negotiations with Israel.
Mr. Erekat resigned in protest after he was left out of the Palestinian delegation that will meet Mr. Sharon.