Israel has frozen contacts with the Palestinian Authority.
Israeli sources pledged that contact would not be resumed until the Authority arrested those involved in an alleged arms smuggling attempt.
Israeli Prime Minister Mr Ariel Sharon made the announcement to political supporters outside Tel Aviv tonight but said security contacts with the Palestinians would not be affected by the measure.
The Israeli cabinet has already cut off ties with Palestinian President Yasser Arafat, declaring him irrelevant to efforts to end more than 15 months of Israeli-Palestinian violence.