Olmert was elected in March promising to set Israel's final borders with the Palestinians by uprooting isolated communities dotted all over the West Bank while holding on to major settlement blocs. Israel, Olmert said, would act unilaterally without a Palestinian peace partner ¡ª something it appeared inclined to conclude because of Hamas' violently anti-Israel ideology.

But a summer war with Lebanese guerrillas, which many Israelis blamed on their unilateral pullout from southern Lebanon six years ago, left Israelis cool to ceding more territory, and Olmert shelved that plan.

His speech Monday signaled a final break with that program ¡ª and an attempt to entice the Palestinians back to the negotiating table by outlining likely Israeli concessions under a future peace deal.

"We, the state of Israel, will agree to the evacuation of many territories and the settlements that we built there. This is extremely difficult for us, like the splitting of the Red Sea. We will do it for real peace," he said.

Israel would pull out of West Bank land and uproot settlements under a peace deal, Olmert said.

In return for a serious Palestinian push for peace, he said, Israel would be prepared to reduce checkpoints that have severely restricted movement in the West Bank; release hundreds of millions of dollars in funds frozen after Hamas took power in March; and free some of the thousands of Palestinian prisoners Israel holds if Hamas-linked militants release ¡ª alive and healthy ¡ª an Israeli soldier they captured in June.

The freezing of funds has created great hardship in the Palestinian territories by rendering the Hamas government unable to pay full salaries to its civil servants, who provide for one-third of the Palestinian people.

A significant prisoner release would be a major confidence-building gesture because prisoners hold great weight in Palestinian society.

Israeli government officials said they had not ruled out releasing Palestinian uprising leader Marwan Barghouti, who is serving five life sentences for masterminding deadly attacks.

In exchange for Israeli concessions, Olmert said, Palestinians would have to renounce violence, recognize Israel's right to live in peace and security and give up their demands to allow refugees from the 1948 Mideast War to return to their homes in what is now Israel.

"The uncompromising extremism of your terror organizations ... hasn't brought you closer to achieving the goal that I'm convinced many of you share ¡ª to establish a Palestinian state," he said.

Hamad, the Palestinian government spokesman, said Palestinians would not abandon the fight for refugees.

"It is a main part of the Palestinian cause," he said.

Olmert's offer to revive stalled peace talks came a day after the two sides began observing a cease-fire in Gaza, raising hopes new peace efforts would follow.

Palestinian militants violated the cease-fire by launching two rockets at Israel on Monday. No one was injured, but Israel has threatened to strike back if rocket attacks increase.

The Army of Islam, a militant group linked to Hamas which claimed responsibility for seizing the Israeli soldier in June, has refused to abide by a cease-fire with Israel, according to an Internet statement posted on Monday.

Erekat said he was working with the Israelis to expand the cease-fire to the West Bank and hoped to have an agreement within days. Israeli officials said they would wait to see what happens in Gaza first.

"If the cease-fire in Gaza works, I hope it will be possible to transfer that more positive reality to the West Bank as well," Foreign Ministry spokesman Mark Regev said.

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