The spiritual leader of the Palestinian militant group Hamas says it has decided to suspend "fighting operations" against Israelis.
Sheikh Yassin's remarks are very significant
In a television interview in Gaza City, Sheikh Ahmed Yassin said this was not yet a formal ceasefire, and that Hamas was working with other Palestinian factions on a joint statement.
The BBC's James Reynolds says Sheikh Yassin's words are highly significant - coming just a day before US National Security Adviser Condoleezza Rice is due to meet Palestinian Prime Minister Mahmoud Abbas.
A Palestinian ceasefire is a key opening demand of the new international peace plan, the roadmap, and Mr Abbas - also known as Abu Mazen - had held extensive talks with Hamas and other groups to reach a deal.
But Israel has dismissed the talks, urging Abu Mazen to dismantle the militant groups.
A senior Israeli Government source responded to Sheikh Yassin's statement by saying any truce signed by Hamas was "not worth the paper it's written on".
Sheikh Yassin's remarks came as Israeli security sources told the BBC that a deal had been agreed with the Palestinian Authority under which it would retake control of areas of the northern Gaza Strip and the West Bank town of Bethlehem.
The sources said that further discussions were to be held over the weekend, and that any pullback of Israeli troops would not begin until early next week.
Hamas studied all the developments and reached a decision to give a situation called a hudna, or suspension to the fighting operations
Hamas spiritual leader
But the signs of progress came as three suspected Palestinian militants and a civilian were killed along with one Israeli soldier in an Israeli military operation against Hamas in Gaza City.
Under the US-backed roadmap peace plan, Israel is due to withdraw to positions it held before the outbreak of fighting in September 2000.
EU resists ban
Earlier in Brussels, the chief spokesman for the European Commission's executive committee, Reijo Kemppinen, seemed to brush off a call by US President George W Bush to extend the EU's ban on the Hamas military wing to the whole organisation.
The Palestinians are getting ready to police their own land
"You can't say that the whole of Hamas is a terrorist
organisation and certainly that is not our position," Mr Kemppinen said.
He cited Hamas's welfare programmes in the Palestinian territories.
Ms Rice's visit this weekend is a new step in direct US involvement in Middle East peace negotiations:
President Bush visited the region in early June, proclaiming that Middle East peace was his highest priority now that Saddam Hussein had been ousted in Iraq
Secretary of State Colin Powell visited last week to urge the two sides to stick to the roadmap
US Ambassador to Israel Dan Kurtzer and US peace monitor John Wolf brokered the latest Palestinian-Israeli talks at the US Embassy in Tel Aviv
While Ms Rice's visit may coincide with an Israeli troop withdrawal from Gaza and Bethlehem, the Americans view the possibility of a militant ceasefire with indifference bordering on contempt, our analyst says.
Washington's blunt message - which is causing some discomfort in Europe as well as the Arab world - is that Hamas has no political role to play and must be destroyed.