The meeting was carried out in a serious and positive atmosphere

Israeli spokesman

The announcement was made shortly after a US-sponsored meeting between Israeli and Palestinian security chiefs at the Erez checkpoint between the Gaza Strip and Israel.

The office of the Israeli Prime Minister, Ariel Sharon, issued a statement describing the meeting as "serious and positive".

An Israeli spokesman said the two sides had also agreed on ways of easing restrictions on the movements of Palestinians.

'Glimmer of hope'

However, the chief Palestinian negotiator, General Abdelrakez al-Mjaidada, said Israel had given a completely insufficient response to Palestinian concerns about Israeli incursions into their autonomous territory.

Despite their complaints, the Palestinian side did declare itself ready to "resume security co-operation" with Israel if their demands are satisfied.

As the meeting took place, a mortar shell fired by the radical Palestinian group PFLP fell near the boundary of an Israeli settlement in Gaza. No casualties were reported.

Israeli police on Sunday said the body of a missing Jewish settler had been found inside his car near the West Bank town of Ramallah. Police said the body bore signs of being badly beaten.

I think we have to try to make a breakthrough. It is possible, even if it is difficult

Israeli Foreign Minister Shimon Peres

Meanwhile, the Israeli Foreign Minister Shimon Peres confirmed he was maintaining discreet contacts with the Palestinians to find a way of ending the violence.

He suggested there remained a glimmer of hope. "Violence cannot be stopped only by the use of force. It's also necessary to talk," he said.

"I think we have to try to make a breakthrough. It is possible, even if it is difficult."

Mr Peres had spoken by phone to Palestinian leader Yasser Arafat about ceasing hostilities, Israel TV reported.

Israeli incursion

Earlier on Saturday, Israeli tanks and bulldozers entered a Palestinian-controlled part of Gaza for the third time this week.

Israeli tanks entered a Palestinian controlled area

Firing machine guns as they went, the tanks destroyed a Palestinian security outpost in the south of the Gaza Strip.

Israel's army said the action was a response to Palestinian firing from the post at Israeli soldiers.

The Palestinians are demanding that the Israelis end their blockade of Gaza and stop entering Palestinian-controlled areas of the territories.

Mr Sharon was heavily criticised by the international community and particularly the Americans for moving into Palestinian territory earlier this week, following Palestinian mortar attacks inside Israel.