Following his decisive victory in the Israeli election, Mr Ariel Sharon has urged the Palestinians to end violence and resume dialogue.
"I call on the Palestinians to cast off the path of violence and return to the path of dialogue to resolve the differences between us," Mr Sharon said in his victory speech, following his crushing defeat of the Prime Minister, Mr Ehud Barak.
Speaking in Gaza last night, Palestinian leader Mr Yasser Arafat said he respected Israel's election of Mr Sharon and hoped the peace process would continue under him. However, Palestinian cabinet secretary Mr Ahmed Abdel Rahman cautioned that Mr Sharon's policies did not represent a basis for talks between the two sides.
The Islamic militant group Hamas responded bullishly: "We and our people are not afraid of Sharon; just the opposite, he gives us a motivation to pursue the resistance," a spokesman for the group said.
Hamas has carried out dozens of armed attacks against Israeli citizens and soldiers.
US President George W. Bush congratulated Mr Sharon on his victory and said he hoped they could work together to bring "peace and stability" to the Middle East.
White House spokesman Mr Ari Fleischer said Mr Bush had telephoned the victor shortly after Mr Barak conceded.
US Secretary of State, Mr Colin Powell, said: "This is a time to be patient, give the winner an opportunity to decide what kind of a government will be formed . . . and to encourage all the leaders and all the people of the region to refrain from any acts that would lead to violence." He was speaking at a joint news conference with visiting British Foreign Secretary, Mr Robin Cook.
Neighbouring Jordan was awaiting signs of how Sharon intended to conduct his administration, Foreign Minister Abdel Ilah al-Khatib said. "Jordan will judge the government that will be led by Sharon by its engagement to the peace process and the actions he will take to achieve it," Mr Khatib said.
"The real challenge to which the region and its peoples will be confronted is the achievement of a just and durable peace," he added.
Syria responded to Sharon's triumph by reiterating its conditions for peace, including Israel's full withdrawal from occupied Arab lands.
"We want peace, for us and the others," said Mr Ali Abdel Karim Ali, director general of the official SANA news agency in an editorial in response to Mr Sharon's win.
"But, as President Bashar al-Assad puts it, we want a peace that gives us back all the [occupied] territories, with no part missing, and that guarantees security for our people and our future generations," he added.
The EU congratulated Mr Sharon but urged him to pursue efforts to establish a "just and lasting peace". "On behalf of the European Union, and for myself I congratulate Ariel Sharon for his victory in the election," said Swedish Prime Minister Mr Goeran Persson, whose country currently holds the rotating EU presidency.
"I look forward to continued co-operation between the European Union and Ariel Sharon in continuing to establish a just and lasting peace in the region."
Meanwhile, disillusioned supporters of Mr Barak were trying to come to terms with the defeat. Despite two months of opinion polls that forecast Mr Sharon's unprecedented victory, many of Mr Barak's supporters said they had believed to the end Israelis would re-elect the prime minister.
When Mr Barak said he had congratulated Mr Sharon, who invited him to join the coalition he must form in the next 45 days, the crowd booed.
More shocking for Labour supporters than the devastating poll results was Mr Barak's decision to quit politics. After the announcement, it took activists several seconds to break a tense silence with a chant of "Stay, stay, stay".
"From his personality, I thought he would continue the fight," said Prof Yosef Noiman (70) of Tel Aviv University. "Now the peace camp has to recover and unite and pick a new leader."