"Following the progress that has been made in the negotiations on security with the Palestinians, President Mubarak has invited Prime Minister Ariel Sharon and the president of the Palestinian Authority Mahmud Abbas to a meeting next Tuesday at Sharm el-Sheikh," said a statement.

"The prime minister has accepted this invitation," it added.

Meanwhile Israel was set to freeze its pursuit of wanted militants Wednesday as part of efforts to bolster new Palestinian leader Mahmud Abbas, who is struggling to prevent a tentative truce from unravelling.

As Palestinian security forces moved to uncover tunnels which have been used to smuggle in weapons to Gaza-based militants from Egypt, Israel indicated that members of the factions could soon rest easy from the threat of detention.

"We will give Abu Mazen (Abbas) a chance by suspending our operations against the wanted Palestin-ians, but this is a freeze not an amnesty," Amos Gilad, chief political advisor to Defence Minister Shaul Mofaz, told army radio.

"If these wanted Palestinians start up their terrorist activities again, we will resume our offensive operations against them," added Gilad.

Gilad also expressed satisfaction at what he called the "dramatic fall" in attacks by Palestinian militants in the past few days after Abbas managed to persuade armed groups to observe a temporary "cooling down" period.

The Palestinian president is trying to translate the temporary truce into a formal ceasefire but wants Israel to reciprocate by ending its military activities in the occupied territories and starting to release prisoners.

A spate of Palestinian mortar attacks on Monday and Tuesday on Jewish settlements in the south of the Gaza Strip has underlined the fragile nature of the current situation.

But Gilad said Israel had to be prepared to "take courageous measures to have a credible partner".