At a two and a half hour meeting in Jerusalem with his Palestinian counterpart, Prime Minister Abu Mazen, Sharon also offered to free Palestinian prisoners, increase the number of Palestinian workers allowed to work in Israel and hand over more of the Palestinian tax money that his government has been holding.
The Palestinian Authority's foreign minister was noncommittal with regard to Palestinian reaction to the proposals, saying only that Abu Mazen told Sharon he would study the offer. The pullout would require Palestinian security forces to take over preventing attacks on Israel, and Abu Mazen told the Israeli daily Haaretz Tuesday that their security systems particularly in the West Bank are nearly destroyed.
Foreign Minister Nabil Shaath, who was present at the meeting, said the Palestinian delegation had "a good impression" from the talks, the second such session since Abu Mazen assumed the newly established office in late April. PA Minister of State for Security Affairs Mohammad Dahlan also attended Thursday's meeting. PA President Yasser Arafat did not.
Shaath told United Press International that reactivating industrial zones in the West Bank and Gaza as well as allowing the Palestinian Authority to rebuild and reopen Gaza's airport were among issues that both sides had agreed upon.
But he added, "In relation to the Israeli army pullout from territories and handing security responsibilities to the Palestinians, that is going to wait until after the trilateral summit."
As in the two leaders' first meeting May 17, reporters were kept away. Abu Mazen, whose formal name is Mahmoud Abbas, drove into the fenced compound of Sharon's offices through a side entrance.
A lengthy Israeli statement issued close to midnight said that at the end of the meeting the two leaders decided to hold a "comprehensive dialogue." It would include meetings among experts at various levels while the two leaders would "supervise progress."
Thursday night's meeting comes less than a week before U.S. President George Bush arrives in the area and is scheduled to hold a summit with Sharon and Abu Mazen, with Jordan's King Abdullah hosting the meeting in the southern town of Aqaba.
Sharon's media adviser used similar words as the Palestinians to describe the meeting, saying it was held "in a positive and very good atmosphere."
The Israeli statement said the troop deployment would be made "in a way that would make it easier for the Palestinians to assume responsibility for security in those areas and ... to stop terror." That means Israeli troops would pullout of the centers of West Bank towns and "reduce military presence there." Israel has retaken all West Bank cities except for Jericho.
The offered pullback would be neither a complete nor necessarily permanent one, however.
Sharon told Abu Mazen that "in every case in Palestinian-controlled areas where a real danger to Israeli lives would emerge, and the Palestinians would not act to prevent it, the IDF (Israel Defense Forces) would not hesitate to foil that risk."
Sharon demanded the Palestinians dismantle terrorist organizations, detain terrorists, confiscate illegal weapons, cease violence and, "create an atmosphere of peace," the Israeli statement reported.
The PA's Shaath said Abu Mazen updated Sharon on the progress he has made in negotiating a ceasefire with Hamas for an end to armed attacks against Israel and the firing of Qassam rockets at Israel. Other sources close to Shaath added that he had immediately called Isma'eel Abu Shanab, a prominent Hamas leader in the Gaza Strip, and briefed him on what had been discussed in the meeting.
A senior member of Hamas, or the Islamic Resistance Movement, that UPI reached early Friday said the militant group is willing to accept a one-year ceasefire to test Sharon's intentions to end the Israeli occupation.
Sharon also promised to go over the names of the Palestinian prisoners it is holding –- they number in the thousands -– and decide who may be freed. Freeing prisoners has been a major Palestinian demand.
The prime minister said Israel would free "administrative detainees," meaning prisoners it has been holding without trial. Palestinian sources told Israel Radio Sharon talked of some 100 people.
Sharon reportedly acceded to a Palestinian request to release the head of the Democratic Front in the occupied territories, Tayasir Khaled, and Ahmed Jabara, of Fatah, who has been in jail for the past 28 years.
Other measures are designed to ease travel restrictions that have crippled Palestinian economy.
Israel will re-issue permanent passes for senior Palestinian officials; will allow 15,000 Gazan workers and 10,000 West Bankers into Israel to work; will increase the number of workers in joint industrial zones along the border, and will allow 8,000 Palestinian businessmen into Israel. Border crossings will be open for more hours. Some 2,000 Palestinian workers will be allowed to stay in Israel overnight, the Israeli statement said.
Israel has been holding taxes it has collected on the Palestinian Authority's behalf and agreed to hand over 150 million shekels ($34 million) a month, the statement added.
The 'road map' for peace that the Quartet -- the United States, the United Nations, Russia and the European Union -- published on April 30 calls for reciprocal steps leading to the creation of a Palestinian state and peace and security for Israel by 2005.
It calls for "creation of an independent Palestinian state with provisional borders" by the end of 2003.
Sharon told Abu Mazen that if the Palestinians will make terror and violence "disappear," Israel intends to "open diplomatic negotiations in accordance with the conditions, the principles and the stages laid out in President Bush's speech of June 24, 2002."
In that framework it would agree to establish "a provisional Palestinian state and after that a permanent state," the Israeli announcement said. Israel has all along preferred the principles in Bush's speech to the detailed roadmap.
For example, Bush talked of a Palestinian state whose borders "and certain aspects of its sovereignty will be provisional," before the final settlement is reached, the 'road map' envisages "international recognition of (a) Palestinian state, including possible U.N. membership," before the final status negotiations.
(Saud Abu Ramadan contributed to this report from Gaza.)