Israeli diplomatic sources said the meeting could pave the way for the establishment of diplomatic ties, while Pakistani diplomats denied the talks constituted a move to recognise Israel after six decades without diplomatic ties between the Islamic republic and the Jewish state.

The two ministers were nonetheless upbeat as they emerged from the talks arranged after Turkey, a mainly Muslim but strictly secular state which enjoys close ties with both capitals, played a key mediating role to bring them together.

In a joint press conference with Shalom, Kasuri hailed Israel's pullout from the Gaza Strip, which he said constituted a turning point for the establishment of a Palestinian state.

"Pakistan has therefore decided to engage with Israel," he told reporters at a top Istanbul hotel where the talks were held but did not elaborate on what sort of an engagement his country was planning.

Shalom, for his part, said the meeting heralded a new era in bilateral ties.

"This is a historic meeting," the Israeli minister said. "We see this meeting as the beginning of a new period, the beginning of open and useful mutual relations."

He praised the "courage" of Pakistani President Pervez Musharraf in "supporting peace between Israel and the Muslim World".

The two ministers are expected to hold separate press conferences later in the day.

Pakistani officials, who requested anonymity, told AFP from Istanbul that the talks were encouraged by the recent developments in the Middle East towards a peaceful settlement, but denied that full diplomatic ties were on the agenda.

Israeli diplomatic sources in Turkey said the two countries were looking to "normalise ties" in a bid to set up diplomatic relations and that a formal agreement could be announced at the UN General Assembly later this month, to be attended by leaders of both countries.

"It is premature to speak about establishing diplomatic relations, but it is definitely a step towards normalization of relations," the spokeswoman for the Israeli embassy, Sharon Bar-Li Saar, told AFP.

Israel already has a close relationship with Pakistan's neighbour and arch rival India, but a spokesman for the Israeli foreign ministry said "any improvement in our relations with Pakistan would not be at expense" of other nations on the sub-continent.

Israel currently has full diplomatic relations with only three Arab states -- Mauritania, Egypt and Jordan -- and a handful of Muslim majority states including Turkey.

It has been hoping that the historic pullout of troops and settlers from the Gaza Strip would help bridge the gap with the Arab and Muslim world.

Pakistan has long said it will not recognise Israel until there is a long-term solution to the plight of the Palestinians. But it recently praised Israel's historic withdrawal from the Gaza Strip.

Pakistan's President Pervez Musharraf is due to make a rare address to the American Jewish Congress in New York on September 17 to speak about his campaign for moderation in the Muslim world.

Dawn, Pakistan's oldest English-language daily, said the talks were "in response to Israel's keenness to establish contact with Pakistan."