Israeli Prime Minister Ehud Olmert, building on a days-old truce in Gaza, appealed to the Palestinians to return to the negotiating table, saying Israel was prepared to work toward an independent Palestinian state if they would embrace the path of peace.
In a speech on Monday, Olmert dangled the prospect of major confidence-building measures, including the release of frozen funds the Palestinians desperately need, and freedom for some of the thousands of Palestinian prisoners Israel holds, significant because of the prisoners' iconic status in Palestinian society.
Olmert did not offer any new ideas about the thorniest issues separating the Palestinians -- borders, the status of disputed Jerusalem and the Palestinians' demand that refugees and their descendants be allowed to return to sovereign Israel.
But the timing of the speech was important, coming one day after the truce took hold.
"I hold out my hand in peace to our Palestinian neighbors in the hope that it won't be returned empty," Olmert said.
"We cannot change the past and we will not be able to bring back the victims on both sides of the borders," he said. "All that we can do today is stop additional tragedies."
Olmert urged the Palestinians to form a new, moderate Cabinet committed to carrying out a US-backed peace plan and securing the release of a captured Israeli soldier.
Then, Olmert said, he would call for an immediate meeting with Palestinian President Mahmoud Abbas, "to have a real, open, honest, serious dialogue between us."
Palestinian reaction to the overture was mixed.
Palestinian Legislator Saeb Erekat, a top Abbas aide, said the Palestinians were ready to negotiate a final peace deal.
"I believe Mr. Olmert knows he has a partner, and that is President Abbas," Erekat said. "He knows that to achieve peace and security for all, we need to shoot for the end game."
But the Palestinian Cabinet, led by Hamas militants who reject Israel's right to exist, accused the Israeli leader of posturing.
"This is a conspiracy. This is a new maneuver. Olmert is speaking about the Palestinian state without giving details about the borders," said Ghazi Hamad, a government spokesman.
Olmert's offer to revive long-stalled peace talks came a day after the two sides began observing a ceasefire in Gaza, raising hopes new peace efforts would follow. Palestinian militants violated the truce by firing rockets at Israel on the first two days after the cease-fire went into effect, but there were no reports of further violations yesterday.
With US President George Bush due to arrive in Jordan this week for talks with Iraqi leaders, there was heated speculation that either he or US Secretary of State Condoleezza Rice would try to capitalize on the momentum created by the cease-fire and Olmert's speech by meeting with Israeli and Palestinian leaders.
But neither the US mbassy nor Israeli and Palestinian officials could confirm such meetings.
Olmert's comments sealed a dramatic policy shift for a man who took power just six months ago.
He was elected in March promising to set Israel's final borders with the Palestinians by uprooting isolated communities dotted all over the West Bank while holding on to major settlement blocs. The expectation was that Israel would take this action unilaterally, given Hamas' violently anti-Israel ideology.