RAMALLAH, West Bank (AFP) - Palestinian leader Mahmud Abbas called on Israel to make a swift response to demands for a mutual ceasefire with armed factions as a top official claimed some 900 Palestinian prisoners would soon be released by Israel.

Israeli Prime Minister Ariel Sharon, meanwhile, said an "historic breakthrough" was possible with the Palestinians following truce efforts by their new leader Mahmud Abbas.

"I think that an historic breakthrough is possible in our relations with the Palestinians. I want to underline that we are detecting encouraging signs but these things must still be verified," he told Israeli businessmen in Jerusalem.

Adding to the momentum, new US Secretary of State Condoleezza Rice is to leave next week on a tour of European nations as well as Israel and the West Bank, officials in Washington said.

Abbas held his first talks with a senior US official on Thursday since his January 9 election, after winning praise from President George W. Bush and Sharon for his efforts to end the armed uprising.

"We are interested in a mutual ceasefire. The Israelis have also told me that they are interested but they need to respond very quickly," Abbas told reporters. "There is no reason why they should delay any decision."

The successor to the late Yasser Arafat has already secured an agreement from militant groups such as Hamas and the Al-Aqsa Martyrs Brigades for a "cooling down" period.

There has been a sharp reduction in attacks by militants over the past week from their Gaza stronghold where thousands of Palestinian security forces have been deployed with orders to prevent the firing of rockets.

However Abbas, speaking after talks with US Assistant Secretary of State William Burns, said the situation "cannot last for long".

The factions have said that they are willing to make a formal ceasefire declaration if Israel ends its military operations in the occupied territories and starts to release the 8,000 Palestinians being held in Israeli prisons.

A senior official claimed that Israel had already agreed in principle to release hundreds of Palestinian prisoners.

"They have agreed to release around 900 in the first phase which I expect to take place in the near future," said the official who was present at talks on Wednesday with Sharon´s top advisor Dov Weisglass.

A source close to Sharon however denied any such agreement had been reached.

"The prisoner issue was raised at the meeting yesterday, and it is part of a range of issues which will be discussed between Abu Mazen (Abbas) and Prime Minister Sharon," he told AFP.

Former Palestinian security minister Mohammed Dahlan told AFP that Israel had also agreed to leave five West Bank cities, in the talks between senior officials held in Jerusalem.

Although Sharon expressed his satisfaction at the moves by Abbas to reduce the violence on the ground, Foreign Minister Silvan Shalom was distinctly cool on talk of a ceasefire.

"Anyone who thinks a ceasefire is the right thing to do, is mistaken. A ceasefire is a ticking bomb which will blow up in our faces," the Israeli minister told army radio.

Burns had a more upbeat assessment of the situation, detecting "the best chance for progress that we have seen in the last few years".

"The United States welcomes the steps that President Abbas and the Palestinian Authority have taken that have resulted in the return of order and security and the moves of the authority to reach a ceasefire.

In another confidence-building move, Palestinian prime minister Ahmed Qorei signed a decree banning anyone but members of the security services from carrying weapons. (Copyright © 2005 Agence France Presse. 01/27/05)