The decision, following US pressure, was an important step toward freeing access to the Gaza Strip, seen internationally as vital for translating Israel's pullout from the occupied territory into a new chance for peacemaking.

Opening the Rafah crossing would mark the first time since Israel captured the West Bank and Gaza Strip in 1967 that Palestinians would be allowed to enter and leave either territory without passing through Israeli controls.

But details, including the possible role of European Union monitors, still have to be finalised with the Palestinians. Recent contacts have been weighed down by the worst violence since the Israeli withdrawal in September.

The Egyptian-proposed plan also has to be approved by the full Israeli cabinet, probably on Sunday.

Under the plan accepted in Cairo last week by Defence Minister Shaul Mofaz, the foot crossing would be under foreign oversight to assuage Israeli fears that arms and militants could easily cross into Gaza.

Israel has been under pressure from the United States to help open Gaza's frontiers so Palestinians can trade and travel more easily. International mediators hope a thriving economy in Gaza will boost a peace "road map" for Palestinian statehood.

Meanwhile, Israeli Prime Minister Ariel Sharon made future progress in the Middle East peace process conditional on the disarmament of Palestinian militant groups Monday as he vowed to expand Jewish settlements in the occupied West Bank and Golan Heights.

Delivering his first address to parliament since withdrawing troops and settlers from the Gaza Strip after a costly 38-year presence, the prime minister said the onus was now on the Palestinians to make painful concessions towards peace.