Two Israeli cabinet ministers have confirmed the government is to hand over three West Bank suburbs of Jerusalem to full Palestinian rule as part of an upcoming troop withdrawal.
The decision has sparked an outcry from hardline opposition leaders who allege handing over the suburbs of Anata, Beitunia and Ubeidiya is the first step towards dividing Jerusalem.
Prime Minister Ehud Barak is expected to present the maps to his security Cabinet for approval on Wednesday.
Israel troops are to withdraw from a further 6.1 percent of the West Bank.
Israeli radio says Ehud Barak is to present the withdrawal map to his security Cabinet on Wednesday and to his full Cabinet on Sunday.
The pullback is expected to take place next week.
The villages are Anata near Jerusalem, Ubeidiya near Bethlehem as well as Sourif near Hebron and Beitunia near the Palestinian city of Ramallah.
Anata, a crowded, rundown industrial suburb, directly borders Jerusalem in the east and is close to Pisgat Zeev, a Jewish West Bank settlement.
Residents of Jewish neighbourhoods adjacent to the three Palestinian suburbs said they feared the areas could become a safe haven for Palestinian militants.
But Arab inhabitants in Anata were enthusiastic about the forthcoming move.
"We are happy to see Anata become a part of the Palestinian Authority because we believe Anata will be the gate to Jerusalem which is only 3 kilometres away from us."
SUPER CAPTION: VOX POP
"Of course when the Palestinian security forces redeploy in Anata, of course life will be much better than today."
SUPER CAPTION: VOX POP
Opposition leaders have begun accusing Prime Minister Ehud Barak of secretly planning to make major concessions to the Palestinians in negotiations over the final status of the city.
The future of Jerusalem is one of four major issues to be addressed in a final peace treaty that is to be concluded September 13.
The Palestinians hope to establish their capital in east Jerusalem, the sector Israel captured from Jordan in the 1967 Mideast war and annexed to its capital.
Israel has said it would never relinquish sovereignty over all of the city.
"What happened now is very important for the city of Jerusalem and the state of Israel because on the withdrawal from these Arab villages - they are now in fact out of the borders of Jerusalem. We will fix for the future the peace borders of Jerusalem and Israel."
SUPER CAPTION: Cabinet Minister Ran Cohen
The Palestinians suspended talks last month after Israel refused to include the villages in the troop withdrawal and set a time frame for an additional pullout ahead of a final peace treaty.
Palestinian officials have welcomed the handover of three West Bank suburbs of Jerusalem to full Palestinian rule.
"Well the redeployment in Anata is a step forward and a positive thing because the neighbourhoods around Jerusalem are part of the Palestinian occupied territories and they have to be delivered to the Palestinians."
SUPER CAPTION: Ziad Abu Zayyad, Palestinian Authority Minister in Charge of Jerusalem
Cabinet Minister Haim Ramon, who is close to Barak, denied on Tuesday Israel would give up parts of the city.
But despite such assurances, the decision has angered Israeli hard liners.
"People that know the map of Jerusalem can tell you immediately that it means really giving the Palestinians neighbourhoods around Jerusalem - that are part of Jerusalem practically speaking."
SUPER CAPTION: Danny Naveh, right-wing Knesset member
The move may be one step forward in the peace-process - but could further divided support for the Israeli Prime Minister.