Israel has announced it will ease its blockade of the Gaza Strip and allow more civilian goods to enter the Palestinian territory.
The move comes amid international pressure on Israel, following its raid on aid ships bound for Gaza last month.
Both the Palestinian Authority and the Islamist group Hamas dismissed Israel's announcement, calling for a full lifting of restrictions.
Israel and Egypt tightened the blockade when Hamas took over Gaza in 2007.
The Israeli decision followed two days of meetings of the country's security cabinet.
The move will see an expansion in the number of products Israel will allow into Gaza via border crossing points, although the naval blockade will remain in place.
The new Israeli-approved product list reportedly includes all food items, toys, stationery, kitchen utensils, mattresses and towels.
An Israeli government statement did not specify any items other than construction materials for civilian projects, which it said would be allowed in under international supervision.
Israel has until now blocked materials like cement and steel, arguing that Hamas could use them to build weapons and fortifications.
Israeli Prime Minister Benjamin Netanyahu's office said in a statement that Israel would: "liberalise the system by which civilian goods enter Gaza"; "expand the inflow of materials for civilian projects that are under international supervision"; and "continue existing security procedures to prevent the inflow of weapons and war material".
It added: "The cabinet will decide in the coming days on additional steps to implement this policy."
It also said that Israel expected the international community to work toward the immediate release of Gilad Shalit, an Israeli soldier captured by Hamas fighters on the Israel-Gaza border in 2006.
Hamas spokesman Sami Abu Zuhri said some of the goods that would now be allowed in were "trivial and secondary", adding: "What is needed is a complete lifting of the blockade.
"Goods and people must be free to enter and leave. Gaza especially needs construction material, which must be allowed to come in without restrictions."
In the West Bank, the Palestinian Authority government of Mahmoud Abbas also said the blockade should be lifted in its entirety.
White House spokesman Robert Gibbs called the easing of sanctions a "step in the right direction".
International Middle East envoy Tony Blair, who helped work out the deal with Israel, said it was a "good start".
"We need to make sure that people's lives in Gaza do improve," Mr Blair said. "That's the purpose of the change of policy that people like myself have argued for for the past two years."
He also called for the unconditional release of Sergeant Shalit, saying: "That would allow us to make even further progress.
"But I am absolutely determined to secure significant change over this coming period so that people in Gaza, ordinary people in Gaza, many of whom do not support Hamas, many of whom are young children, get the access to the basic necessities of life that they require and daily life and can start to return to normal."
The Israeli announcement came after Syrian President Bashar al-Assad said Israel's raid on the aid flotilla had increased the chances of war in the region.
He told the BBC's Middle East editor Jeremy Bowen that although Syria was working to prevent a war, there was no chance of a peace deal with the current Israeli administration, which he called a "pyromaniac government".
Israel says the blockade - which aims to put pressure on Hamas and secure the release of Sgt Shalit - prevents war material entering Gaza while allowing the entry of humanitarian aid.
It has been widely criticised as "collective punishment" of the 1.4 million residents of Gaza.
Nine Turkish activists died in the Israeli commando raid on the Gaza-bound flotilla in international waters on 31 May.
It was the ninth attempt since 2008 to break the blockade by sea, but the first that resulted in bloodshed.