The Israeli Cabinet today narrowly approved an American-backed peace plan which envisions a Palestinian state by 2005, but attached a number of conditions.
The Cabinet approved the plan in a vote by 12 to seven, with four abstentions. The vote marked the first time that an Israeli government has formally affirmed the Palestinians' right to statehood.
The vote came two days after Israeli Prime Minister Ariel Sharon reluctantly embraced the "road map" to Middle East peace, amid intense pressure from the United States.
The Palestinians accepted the plan last month, immediately after it was presented, but Israel sought major changes.
Israel demanded, among other things, that a Palestinian crackdown on militias should precede any steps by Israel. Mr Sharon also insisted that the Palestinians should drop, without further discussion, a demand for the "right of return" of Palestinian refugees to Israel.
Mr Sharon in total lodged 15 objections to the road map. He has stated his blanket refusal to freeze Jewish settlement building in the West Bank and Gaza, although he has signaled a willingness to remove a handful of illegal outposts which have sprung up since he came to office in 2001.
On Friday the United States declared that it would take the Israeli requests into account, but also said there would be no changes in the road map.