Israel has lifted its closure of the West Bank and Gaza Strip ahead of a three-way summit this week with U.S. President George W. Bush.
Israel's lifting of the closure will allow up to 25,000 Palestinians in the territories to go back to work inside the Jewish state.
Israel is also expected to release some 100 Palestinian prisoners as part of confidence building measures before Wednesday's summit in Jordan with President Bush and the Israeli and Palestinian Prime Ministers.
The closure was first imposed in May following a new wave of Palestinian suicide bombings.
Israel's Defense Minister, Shaul Mofaz, said soldiers would remain active inside the territories in a bid to prevent any more such attacks.
He said although the closure had been lifted Sunday Israeli troops would still maintain a presence inside some Palestinian self-rule areas of the West Bank and Gaza Strip.
At the same time, Israeli officials stressed that a phased withdrawal of the soldiers would begin in the near future.
The officials said it was expected that the declaration to be issued at Wednesday's summit in Jordan would include a timetable for a troop pull-back, starting in the Gaza Strip.
Palestinian Prime Minister Mahmoud Abbas said the Palestinian security forces will need "two to three weeks" before they would be ready to take up Israel's offer to resume responsibility for law and order in parts of Gaza and the West Bank.
A group of U.S. monitors selected to observe the withdrawal is also expected to remain in the area to oversee other developments.
Meanwhile, Israeli media has reported that Israeli Prime Minister, Ariel Sharon, has turned down a "suggestion" from the American administration to declare an "end to occupation" of Palestinian areas at Wednesday's summit.
Israel has also reportedly objected to an American proposal that Mr. Sharon state his intention at the summit that he is ready to start evacuating some illegal Jewish outposts in the West Bank.
