The Israeli Cabinet has approved a U.S.-backed peace plan that calls for a Palestinian state by 2005.
The Cabinet voted 12-7 in favor of the road map to peace plan. There were four abstentions.
The cabinet decision marks the first time an Israeli government has approved an initiative that specifically backs a Palestinian state.
The decision has been described as historic by Israeli observers and represents a personal triumph for the prime minister, Ariel Sharon. He had announced on Friday that he was willing to give his personal support to the plan, following a U.S. government statement saying Israeli concerns would be taken into account during implementation of the "road map."
Before the vote, Mr. Sharon told an Israeli newspaper that the moment had come to divide the area into two states.
He also said it had not been an easy decision.
He said Israel would have to make painful concessions, including uprooting Jewish settlements in the West Bank and Gaza Strip, in order to reach a final agreement with the Palestinians.