Israel and the Palestinians have tentatively agreed to resume limited contacts, with the US as chaperone.
This comes after Israel fired dozens of rockets at Palestinian military bases in the Gaza Strip and a Palestinian mortar shell critically injured an Israeli infant.
Israeli and Palestinian officials said they expected a three-way meeting to take place in the coming days, but that a time and place has not been set.
The decision came after a week of steady escalation, including Israel's shelling of bases of Palestinian leader Yasser Arafat's security forces in the Gaza Strip.
Seventy rockets were fired at five areas in Gaza, injuring 77 people, including policemen, said Tayeb Abdel Rahim, a senior aide to Arafat.
In a seaside compound of Force 17, a Palestinian security service, rockets ripped through the metal roof of a large garage, burning a car. Other vehicles had been moved from the compound in anticipation of an Israeli attack, said Major Emad Mustafa of Force 17.
The wall of an empty, two-storey arsenal adjacent to Arafat's home was pierced by a missile. Arafat was in the West Bank town of Ramallah at the time of the attack.
At one point, seven helicopter gunships hovered above Gaza City. The rockets lit up the night sky, followed by loud booms.
Earlier, a 10-month-old Israeli boy, Ariel Yered, had been critically wounded in a Palestinian mortar attack on the Jewish settlement of Atzmona in the Gaza Strip. The infant was hit in the head by shrapnel, while his mother, Leah, suffered a broken arm and shrapnel wounds to the stomach.
The three mortars apparently were fired from the nearby Palestinian refugee camp of Rafah where, a day earlier, Israeli helicopter gunships had killed a leading member of the military wing of the Islamic Jihad group while he was driving his pickup truck.