In the country's biggest security crackdown for a decade, hundreds of Israeli forces have set up road blocks around Arab neighborhoods in Jerusalem. There have also been clashes between protesters and soldiers in the West Bank.
Both sides voiced optimism as talks began in the Egyptian capital, with a top Hamas representative saying he was "full of hope" for reconciliation. Egypt has been instrumental in bringing the two sides together.
The Palestinian cabinet has met in Gaza in a further step toward reconciling with the Islamist Hamas movement. Palestinians have been suffering under political division since Hamas took control of the enclave in 2007.
Palestinian Prime Minister Rami Hamdallah is visiting Gaza to negotiate a Hamas-Fatah unity government. But Netanyahu has said Hamas needs to make three specific concessions for Israel to accept any eventual deal.
Hamas has made an offer to its Palestinian rival, Fatah, agreeing to hold elections in the Gaza Strip. The head of the Heinrich Böll Foundation in Ramallah, Bettina Marx, sees this as a striking and positive development.
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