Palestinian Prime Minister Mahmoud Abbas - also known as Abu Mazen - has ordered his security forces to arrest those responsible for Tuesday's suicide bus blast in Jerusalem.
Abu Mazen is under intense pressure to act
The Palestinian Authority (PA) also broke off contacts with Hamas and Islamic Jihad - the Palestinian militant groups that both claimed responsibility for the bombing, which killed 20 people as well as the bomber and injured up to 100.
The Israeli security cabinet again warned the Palestinians there could be no progress towards peace without a crackdown on militant groups.
Israeli Prime Minister Ariel Sharon has approved a series of pinpoint military strikes against Hamas and Islamic Jihad, to start any time.
Late on Wednesday, Israeli troops shot dead a 16-year-old youth during a raid on a Palestinian refugee camp at Tulkarem in the West Bank.
In late-night talks Palestinian leaders reiterated their support for a three-month ceasefire declared on 29 June and vowed to enforce the law.
Their statement came after talks in the West Bank city of Ramallah involving Palestinian leader Yasser Arafat and his Fatah movement, Abu Mazen and his cabinet, and other political groups.
Palestinian suicide bomber Raed Mesk was pictured shortly before his attack in Jerusalem
The BBC's Chris Morris in Ramallah says it is not clear how the Palestinian security forces will carry out any arrests, as they only control small parts of the West Bank and Gaza.
According to Israeli radio reports, police earlier arrested 17 Palestinians, suspected of being Hamas activists, including several relatives of Tuesday's bomber.
Israel has cut off all contacts with the PA, suspended talks on the handover of several West Bank towns to Palestinian control and re-imposed a total military closure in the West Bank following the attack.
Mr Sharon has reportedly decided that Israel will give the peace process a chance in the long-term, but in the short-term will take action against the perpetrators of the attack, according to Israel's Haaretz newspaper.
The United States has repeated calls for the PA to dismantle extremist groups.
US President George Bush - who on Wednesday telephoned Mr Sharon from his Texas ranch - remained committed to the latest initiative to bring peace to the Middle East, a White House spokesman said.
The US has sent its senior diplomat John Wolf to the region for talks with Israeli and Palestinian officials in an attempt to salvage the US-backed peace plan - known as the roadmap.
Political future at stake
A statement issued by the Palestinian Interior Ministry said that while there had been Israeli provocations, that did not excuse what the militant groups had done in Jerusalem.
It said the bombing was against the interest of the Palestinian people at the time when there had been hope of progress on the ground.
"We have decided to boycott Hamas and Jihad," Palestinian cabinet minister Yasser Abed Rabbo told the BBC.
Our correspondent says Abu Mazen is under intense pressure to act, and he has placed explicit blame on the militants for the first time.
Abu Mazen has previously said that taking on groups like Hamas would lead to a Palestinian civil war.
But our correspondent says that if Abu Mazen cannot find a way to rein militants in, then Israel will ignore him like it ignores Yasser Arafat.
He says that unlike Mr Arafat, Abu Mazen has little popular support on the ground, and his political future depends to a large extent on how he deals with the latest crisis.