Israeli Prime Minister Ariel Sharon (search) said Sunday that peace efforts with the Palestinians would be frozen if they do not crack down on militant groups in the wake of a suicide bombing that killed four people outside a Tel Aviv nightclub.

"There will be no progress politically, and I repeat no political progress, until the Palestinians carry out a determined campaign to destroy the terrorist groups and their infrastructure in the Palestinian territories," Sharon said before his weekly Cabinet meeting.

Israel has repeatedly demanded the Palestinians dismantle militant groups, but new Palestinian leader Mahmoud Abbas (search) has opted instead to pursue a temporary truce agreement with the groups, saying a violent crackdown could lead to a civil war.

Abbas accused a "third party" of orchestrating Friday's attack to sabotage his and Sharon's new efforts at ending more than four years of violence between their peoples. Palestinian security officials blamed the Lebanese guerrilla group Hezbollah (search), which is backed by Syria and Iran.

The Palestinian militant group Islamic Jihad, which has members in Lebanon and Syria, claimed responsibility for the attack.

"The attack was carried out by the Islamic Jihad (search) on the order from Islamic Jihad officials in Syria. We know this for certain," Sharon said.

"The immediate test of the Palestinian Authority (search) will be in a determined operation against the Islamic Jihad," he added.

On Saturday, Palestinian police arrested two suspects with ties to Islamic Jihad. Israeli forces also arrested two of the bomber's brothers and four neighbors in his home village, including the local imam, or mosque preacher. The alleged driver who transported the bomber was also arrested.

Relations between Israel and the Palestinians have warmed considerably since Abbas was elected to replace the late Yasser Arafat last month.

Abbas has deployed Palestinian security forces throughout the Gaza Strip to prevent militants from firing rockets on Israel and brokered a temporary agreement with the militant groups to halt attacks. In response, Israel released 500 Palestinian prisoners, promised to release 400 more soon and agreed to hand over security control of five West Bank towns to the Palestinians.

After the attack, which killed four people and wounded dozens of others waiting outside a nightclub, Israel froze its plan to withdraw the troops.