The move came a day before Israeli Prime Minister Ehud Olmert was to meet in Egypt with Palestinian President Mahmoud Abbas, King Abdullah of Jordan and Egyptian President Hosni Mubarak, Ynetnews.com reported.

The details of the tax transfer were to be discussed at the summit.

Release of the money to the Palestinian leadership in the West Bank was the centerpiece of measures proposed by Olmert to support Abbas following the Hamas seizure of Gaza earlier this month.

Israel's holding of the tax receipts had sparked a financial crisis for the Palestinian Authority leaving it largely unable to pay its own staff.

The decision to free the tax receipts came amid reports of two Qassam rockets being launched Sunday from Gaza into Sderot, wounding three people. Rocket fire from Gaza has continued, but has been decreasing, since Hamas fighters wrested control of Gaza.