But Israel said its sea blockade of Gaza remains in force and it will not allow private imports of building materials. Israel says Hamas, which controls Gaza, could use such materials to build bunkers or weapons to fight Israel.
"It was agreed to liberalize the system by which civilian goods enter Gaza, expand the inflow of material for civilian projects that are under international supervision, and continue existing security procedures to prevent the inflow of weapons and war materiel," the prime minister's office said in a statement.
The Israeli move comes after growing pressure on Israel to lift the blockade of Gaza following Israel's May 31 raid on a Turkish-flagged aid ship that left nine pro-Palestinian activists dead. Each side continues to blame the other for starting the violence, and both Israel and Turkey have appointed investigating panels.
Hamas officials dismissed the Israeli move as "trivial."
"We want a real lifting of the siege, not window-dressing," Hamas lawmaker Salah Bardawil told The Associated Press.
But a senior Israeli official told AOL News that the decision was significant.
"It means we don't have a problem with civilian goods," he said. "And we are willing to expand both the number and the amount of rebuilding projects done under international supervision."
At the same time, he said, the Israeli naval blockade will remain in force, and all cargo must be inspected before it is allowed into Gaza. Prime Minister Benjamin Netanyahu has repeatedly warned that lifting the naval blockade would turn Gaza into an "Iranian port."
Israeli human rights groups welcomed the move but called on Israel to lift the blockade completely.
"The time has come for Israel to ask serious questions about how three years of closure have promoted the goals it declared for itself and what has been the effect on 1.5 million people whose right to travel and to engage in productive work has been denied," said Sari Bashi, the director of Gisha, an Israeli human rights group. "We don't need cosmetic changes. We need a policy that recognizes the rights of Palestinian residents of Gaza not just to consume but also to produce and to travel."
Israel imposed the blockade on Gaza in 2006 after Hamas won Palestinian elections and tightened it a year later when Hamas won sole control of Gaza. It had said it would not lift the blockade until Hamas released a captured Israeli soldier, Gilad Shalit. Later this month, Shalit will mark his fourth anniversary in captivity. Hamas has released several audiotapes and a videotape that prove Shalit is still alive.
Palestinians in Gaza have opened hundreds of smuggling tunnels between Egypt and Gaza that provide many consumer goods. Israel has charged that the tunnels are used to smuggle weapons and cash as well. Israel's decision to allow more goods into Gaza is likely to lessen the need for these tunnels and bring prices in Gaza down.
While some in Israel thought the easing of the blockade did not go far enough, others criticized it for going too far.
"I think Netanyahu gave in to unnecessary international pressure, and we are the ones who will pay the price in the end," Jewish settler leader Yisrael Harel told AOL News. "The U.S. is treating us like a banana republic and continuing to make demands on us."
Harel also said that Hamas, which opposes the existence of Israel, will be strengthened by the Israeli decision.
In Gaza, the news was received with skepticism but also some hope.
"It will be a relief to the people of Gaza," Rami Al-Magheiri, a Palestinian journalist in Gaza, told AOL News by telephone. "It may also lead to more pressure on Hamas to reconcile with Fatah, which is a precondition for serious peace talks with Israel."
Since Hamas took over Gaza in 2007, tensions have run high between Hamas and Fatah, which controls the West Bank. Israel has continued to negotiate with Fatah and is currently involved in "proximity talks" in which U.S. special Mideast peace envoy George Mitchell shuttles between Jerusalem and Ramallah.
The Israeli raid on the Turkish-flagged ship Mavi Marmara has also sparked a crisis in relations between Israel and Turkey, its largest Muslim ally. Turkish media today reported that Turkey has frozen billions of dollars worth of defense deals with Israel, including a $5 billion deal for Ankara to buy 1,000 Merkava Mark III tanks from Israel. Immediately after the raid, Turkey recalled its ambassador to Israel and has demanded an Israeli apology and Israel's agreement to a United Nations inquiry into the events on the ship.
The Zaman newspaper also quoted a Turkish diplomat as saying he does not know if or when the Turkish ambassador to Israel will be returned.
"An apology is Israel's exit if it really wants to normalize relations with Turkey," the unnamed diplomat is quoted as saying. "Destroying such ties is easier than establishing them. We are ready to face the negative impact of cutting these ties in an eventual absence of an apology from the Israeli side."
An Israeli government spokesman declined to comment.





