Israel freed $100 million in frozen tax funds and transferred the money to Palestinian President Mahmoud Abbas, an official in Israeli Prime Minister Ehud Olmert's office said today.
The financial transfer to Mr Abbas was part of tax money Israel collects for the Palestinian Authority under partial peace accords. Israel halted payment of the revenues when Hamas won parliamentary elections and set up its cabinet.
The transfer, made last night, gives the moderate leader a boost ahead of crucial weekend talks in Damascus with the top Hamas leader. It is the first such Israeli payment since the militant Islamic Hamas won control of the Palestinian government last March.
Israel, the US and the European Union define Hamas as a terror group because of its suicide bombings that have killed hundreds of Israelis and its refusal to recognise the Jewish state.
Since Hamas came to power, its vital international aid has been cutoff by foreign donors because of its refusal to renounce violence.
In another development for Mr Abbas, Israeli Defence Minister Amir Peretz rescinded a controversial decision to authorise a new West Bank settlement, a ministry spokesman said.
Also today, the 10-year-old daughter of a Palestinian peace activist, critically wounded by Israeli security forces during a demonstration earlier in the week, died of her injuries in a Jerusalem hospital.
Mr Abbas is to travel to Syria tomorrow for talks with Hamas chief Khaled Mashaal, aiming at forging a coalition government and ending a punishing international aid boycott.
Talks have faltered for months amid clashes between each side's loyalists which have killed 35 people, but the fact that the two leaders were meeting hinted that an agreement might be finally at hand, though key obstacles remained.
AP