The Israeli Prime Minister, Ariel Sharon, and the Palestinian President, Mahmoud Abbas, have made separate declarations that a ceasefire has been agreed at their summit in the Egyptian resort of Sharm el-Sheikh.
It is hoped the ceasefire will end more than four years of bloodshed in which over 4,000 people have been killed.
However, Palestinian Islamist movement Hamas has said it was not bound by the ceasefire.
'We have agreed with Prime Minister Sharon to cease all acts of violence against the Israelis and the Palestinians wherever they are,' Mr Abbas said at the summit.
Confirming the ceasefire, Mr Sharon said he hoped that the agreement would lead to an era of peace in the region.
Egypt's President Hosni Mubarak and King Abdullah of Jordan are also attending the Sharm el-Sheikh summit.
Solana welcomes Egypt summit
The EU's foreign policy chief, Javier Solana, has welcome today's summit between Mr Sharon and Mr Abbas.
Mr Solana urged the two leaders to press on toward the 'dream' of peace in the region.
The Taoiseach, Bertie Ahern, has also welcomed the successful outcome of the summit meeting.
Mr Ahern congratulated the two leaders on the success of their efforts to maintain calm, and urged them to develop the new potential for effective negotiations and a real political breakthrough.
He said Ireland, together with its EU partners, would maintain the commitment to assist the parties in their continuing quest for peace, and also welcomed the intensified engagement of the US in efforts to resolve the conflict.
Aid package promised by Rice
Yesterday, the US Secretary of State, Condoleezza Rice, promised $40 million in aid would be made available to the Palestinian Authority.
Hopes for a diplomatic breakthrough were also boosted yesterday when Ms Rice announced the appointment of a US General as a Security Co-ordinator to the Middle East.
Speaking ahead of today's meeting, US President George W Bush said he was impressed by the Palestinian leader's commitment to fighting terror.
