The militant Islamic group Hamas has said it is suspending suicide attacks inside Israel and mortar bomb attacks against Israeli targets.
Israel dismissed the decision as a tactical move intended to postpone a crackdown on militant organisations by Palestinian leader Mr Yasser Arafat demanded by Israel.
However, Islamic Jihad group vowed to continue carrying out its own suicide attacks inside Israel.
"Our position is to continue. We have no other choice. We are not willing to compromise," Abu Imad Al-Rifai, Jihad's representative in Lebanon, said.
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Senior Hamas leader, Mr Abdel Azziz al-Rantissi
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Hamas, the main faction behind a recent wave of suicide bombings, took the decision after a meeting overnight between senior Hamas leaders and Palestinian Authority officials in the Gaza Strip.
"We declare the suspension of martyrdom attacks inside the occupied land of 1948 and a suspension of mortar fire until further notice," Hamas said in a statement.
Mr Saed Sayam, a senior Hamas official, said the decision was based on the condition that Hamas would "preserve the right of resistance against the occupation and right to respond to Israel's crimes." He gave no details.
Hamas appears to have left the door open to attacks against Israeli soldiers and Jewish settlers in the West Bank and Gaza Strip.
Mr Gideon Meir, a senior Israeli Foreign Ministry official, described the announcement as a tactical move by Hamas.
"Their announcement is something that is very convenient for Mr Arafat at the moment because he wants to have some quiet after the terrorist attacks," he said. "I think there is an agreement, a silent agreement to postpone the crackdown for a while."