Israel said Friday it will release hundreds of millions of dollars in tax funds it has withheld from the Palestinian Authority as a punitive measure.
The United States swiftly welcomed the move, which could help disarm tensions with Washington and the international community after a polarising Israeli election campaign.
"We welcome the decision of the prime minister of Israel to release withheld tax revenues to the Palestinian Authority," said US State Department spokesman Jeff Rathke.
"This is an important step that will benefit the Palestinian people and will help stabilise the situation in the West Bank."
Prime Minister Benjamin Netanyahu's office said revenues accumulated over three months, frozen by Israel since January in retaliation for a Palestinian move to join the International Criminal Court (ICC), would be transferred after normal deductions for services.
But it did not say whether Israel would be resuming the normal monthly payment of around $127 million (118 million euros) in customs duties levied on goods destined for Palestinian markets that transit through Israeli ports.
The Palestinian Authority (PA) reacted with caution.
"Until now we haven't received any money, nor have we officially been informed of anything," PA spokesman Ihab Bseiso said.
The Middle East peacemaking Quartet welcomed the Israeli move.
"It is absolutely the right decision both for the improvement of the conditions of Palestinians on the ground and for Israel," Quartet envoy Tony Blair said in a statement.
"I hope this will be the first of many steps, on both sides, that will mean we can work with renewed vigour to create the conditions for proper negotiations as we progress towards a two-state solution," he said.
The Israeli decision comes 10 days after Netanyahu was reelected and subsequently chosen to form the next government following a campaign in which he pledged to continue settlement activity and prevent the establishment of a Palestinian state, which exacerbated tensions with Washington.
Netanyahu later back-tracked on remarks opposing a two-state solution, while plans for construction in east Jerusalem -- which the Palestinians want as the capital of a future state -- were put on hold.
Signup to our newsletter and follow us on Facebook and Twitter!
- French resolution -
The Israeli decision will help to sustain the PA, which faces financial collapse without tax revenues that constitute some two-thirds of its annual budget, excluding foreign aid.
The move to release the funds took into consideration "humanitarian concerns" and "an overview of Israel's interests at this time", the Israeli statement read.
"Given the deteriorating situation in the Middle East, one must act responsibly and with due consideration alongside a determined struggle against extremist elements," Netanyahu was quoted as saying.
On Wednesday, the Palestinians will formally become members of the ICC and can proceed with legal action at the court based in The Hague against Israeli officials.
They have said they intend to pursue Israeli war crimes allegedly committed during last summer's war in Gaza, as well as Israel's policy of building settlements on occupied Palestinian lands.
A Palestinian state living side by side with Israel in peace is the international community's vision for an end to the decades-long conflict.
The White House has said it may withdraw crucial diplomatic cover for Israel at the UN Security Council as it reevaluates its position.
Such a move could prove problematic for Israel if the Palestinians resubmit a draft resolution setting an end date for the Israeli occupation.
Meanwhile, France is sponsoring a draft resolution that would seek to revive Israeli-Palestinian talks.
French Foreign Minister Laurent Fabius said Friday that discussions on a text would start "in the coming days".
In December, the Security Council rejected a resolution that would have set a deadline for reaching a final peace deal and paved the way to the creation of a Palestinian state.
Fabius told reporters: "Obviously the two parties must discuss, but the discussion must be backed by an international effort."
Israel has long maintained that direct talks with the Palestinians are the best framework for advancing peace talks and has bristled at UN involvement to set a timeframe for a deal.