Israel has blamed the Palestinian government for yesterday's suicide bombing in Tel Aviv.
However, acting Prime Minister Ehud Olmert decided against a proposed military offensive for the time being.
Mr Olmert had convened his interim cabinet and security chiefs to discuss a response to the attack at a sandwich bar which killed nine people.
Among measures authorised was the revocation of the Israeli residency status of Hamas officials living in east Jerusalem and a police crackdown on the smuggling of Palestinians without permits, who could be militants.
Hamas, which has largely abided by a year-long truce but refuses to embrace peacemaking efforts, described Monday's attack - claimed by Islamic Jihad - as an act of 'self defence'.
Today, Palestinian Prime Minister and senior Hamas leader Ismail Haniyeh said Israeli actions had triggered the attack.
Earlier, the Palestinian Authority's chief negotiator, Saeb Erekat, said sanity, courage, wisdom and far-sightedness were needed to break the cycle of violence and counter violence in the Middle East.
In an interview with RTÉ, Mr Erekat condemned yesterday's attack which also left 150 people injured.
He said the Palestinian Authority stood ready to resume negotiations with the Israelis to end their occupation and establish two states.
However, the Hamas-led Palestinian cabinet has refused to condemn the attack.
Spokesman Gazi Hamad said the cycle of violence would not stop until Israel had ended its occupation of Palestinian territory.
US warns Hamas
Separately, the US has warned Hamas that it must not defend such attacks. A US spokesman said that the Palestinian Authority had a responsibility to prevent attacks in Israeli territory.
The UN Secretary-General, Kofi Annan, also called on the Palestinian Authority to take a strong stand against suicide bombings.
He said the international quartet of Middle East advisers would meet next month.
Speaking following the attack, Mr Annan told reporters he would host a quartet meeting in New York on 9 May that would also include 'regional partners' from the Middle East.
Russia has previously suggested that Egypt and Jordan attend. The quartet includes the United States, Russia, the European Union and the United Nations.
