Israel (search) and the Palestinians have agreed to halt nearly a week of fighting after militant groups pledged to halt rocket fire on southern Israeli towns, Palestinian officials said Sunday.

The deal, which Israeli officials refused to confirm, would bring an end to the second serious round of violence since Israel completed its withdrawal from the Gaza Strip (search) last month. While many had expected the withdrawal to restart peace efforts, the two sides have not done so.

The announcement of a halt in fighting came as a top Israeli counterterrorism official warned that Al Qaeda (search) operatives had infiltrated Gaza. Danny Arditi, Prime Minister Ariel Sharon's (search) counterterrorism adviser, said the infiltration likely occurred during several days of chaos following the Gaza withdrawal.

The confusion along the southern border allowed thousands of people to cross between Egypt and Gaza unhindered. The breaching "apparently allowed Al Qaeda and all kinds of international Jihad elements to enter the Gaza Strip," Arditi told Army Radio.

Army Radio reported that Israeli security agents caught three Palestinian militants early this month as they were on their way from Gaza to the West Bank (search) to set up a cell to fire rockets at Israel.

Militants in Gaza have shot hundreds of rockets at Israeli towns, but West Bank militants have not fired rockets or mortars at Jewish settlements and Israeli towns.

The report said three leaders of the Gaza Popular Resistance Committees were arrested by Shin Bet security agents in Israel's Negev Desert after they left Gaza through a tunnel to Egypt and then crossed into Israel over the lightly guarded Israel-Egypt border.

Army Radio, quoting an unidentified senior security official, said the three had funds from the Palestinian militant group Hamas and the Lebanon-based Hezbollah. Israel's government declined to comment on the report.

During his weekly Cabinet meeting Sunday, Sharon promised "severe" retaliation if attacks on Israel continue. But he said he disagreed with comments by Defense Minister Shaul Mofaz in a newspaper interview Friday that peace would be impossible with the current Palestinian leadership.

"This is not the right approach," Sharon told his Cabinet. "We have to try to make efforts to reach an agreement alongside our fight against terror."

The latest round of violence erupted early last week after Israel killed a top Islamic Jihad gunman in an arrest raid. The group responded with a suicide bombing in the central Israeli town of Hadera, killing five people and unleashing a fresh Israeli offensive in Gaza and the northern West Bank.

Israel has pounded Gaza with airstrikes, artillery fire and deafening sonic booms, while Islamic Jihad militants have fired rockets and mortar shells into southern Israel. The violence has stepped up pressure on Palestinian leader Mahmoud Abbas (search) to act on long-standing Israeli and U.S. demands to crack down on militants.

Palestinian Interior Ministry officials said Sunday the militants had agreed to halt the rocket fire. They spoke on condition of anonymity pending an official announcement later in the day. Palestinian factions, including Islamic Jihad and other militant groups, were scheduled to meet Sunday evening.

Nabil Abu Rdeneh, a top adviser to Abbas, said Israel and the Palestinians agreed to stop the hostilities after U.S. intervention.

"Both sides have agreed to stop attacks," he said. "What is required now is to preserve the truce and calm, and every (Palestinian) party should adhere to the political and national positions ... and create an atmosphere that allows working in a way that serves the Palestinian people."

The latest violence has severely tested a cease-fire declared by Abbas and Sharon last February.

Islamic Jihad has only loosely adhered to the truce, carrying out numerous attacks, including four suicide bombings since it went into effect. It says its attacks are reprisals for Israeli violations of the truce.

Khaled al-Batch, an Islamic Jihad spokesman in Gaza, said in a statement that the group is "committed to the mutual calm as long as the Zionists are committed to this calm."

In Gaza, Israel reopened two crossings Sunday to allow cargo and other goods in and out of the coastal area, but a travel ban for the area's Palestinians remained in effect, the army said. Israel closed Gaza's cargo crossings after the Hadera bombing.

Since withdrawing from Gaza last month, Israel has sporadically opened and closed the Karni cargo crossing, but kept closed Gaza's border with Egypt — the only way for Palestinians in the coastal area to travel abroad.

The travel restrictions have hurt the Gaza economy, and the Palestinians want the crossings quickly reopened. Israel first wants security measures in place.