On January 15, Israel and the Palestinian Authority reached an agreement for an Israeli redeployment from the West Bank city of Hebron. The plan split Hebron into two security zones H1 and H2 . Palestinian police will control area H1, while Israeli will remain in control of area H2, where Jewish settlements, al-Haram al-Ebrahime, and many historic sites are located.

On February , US Secretary of State Madeleine Albright learned that she had a Jewish heritage . Born in 1937 in Czechoslovakia and raised as a Roman Catholic. Albright first learned that her parents, grandparents, and other relatives were Jewish from a Washington Post reporter who was researching her background for a biography.

On February , Israeli government release of the women prisoners as per OSLO I agreement .

On February 26, Israeli government announced that they had approved plans for a new Jewish settlement in East Jerusalem, a predominantly Arab area. The settlement, known in Hebrew as Har Homa, would eventually consist of 6500 apartments, as well as parks, schools, and shops. The building site is known to Palestinians as Jabal Abu Ghneim . Palestinian leaders immediately denounced the project.

On March 3 Palestinian leader Yasser Arafat had a meetings with U.S. President Bill Clinton and other U.S. officials .

On March 4 Israel ordered four Palestinian organizations to close their offices in East Jerusalem. Israel says that the offices were parts of the Palestinian Authority, which is not allowed to maintain offices outside Gaza Strip and the parts under its direct control in the west bank .

On March 7 the Israeli cabinet approved a plan to increase the West Bank lands under Palestinian authority control by 9 percent. The offer has been rejected by the Palestinian authority .

On March 13 a Jordanian soldier opened fire on a group of Israeli school children near the Israeli-Jordanian border, killing seven. An investigation found that the soldier was emotionally disturbed . King Hussein traveled to Israel to visits to the victim's families.

On March 15 Arafat called for an emergency conference in the Gaza Strip . Several European countries and the United States attended the conference. Arafat called the conference to pressure on Israel to abandon the Har Homa project .

On March 18, Israeli workers began construction at the Har Homa site.

On March 21, a bomb exploded in a sidewalk cafe in Tel Aviv , killing the bomber and three other people. Dozens more were wounded. Hamas, a militant Islamic group, took responsibility for the bombing. Israeli Prime Minister Benjamin Netanyahu accused Palestinian leader Yasser Arafat of giving the "green light" to renewed attacks in retaliation for Israeli approval of a new Jewish settlement in largely Arab East Jerusalem.

On March 7 and 21, the United States vetoed a United Nations (UN) Security Council resolution that described the new settlement as "illegal." The United States routinely vetoes Security Council resolutions it perceives as biased against Israel.

On March 27 , when U.S. mediator Dennis Ross returned to the region for meetings with Arafat and Netanyahu. Many in the region were not ready to talk peace, however.

On March 30 , in a show of solidarity with Arafat, members of the 22-nation Arab League voted on March 30 to recommend that its members suspend ties with Israel.

On June 3 , members of Israel's Labor Party selected former army chief of staff Ehud Barak, 55, as the new party leader . Barak replaced Shimon Peres, a Labor Party cofounder and one of the architects of the Middle East peace process. If elected prime minister, Barak has said he would follow Rabin's policies and move the peace process forward. He is also expected to move the party away from its left-wing origins and toward the political center.

On July 30 Two martyr bombers exploded themselves in a crowded market in Jerusalem, killing themselves and at least 13 others, and wounding more than 150 people. Hamas, took responsibility for the bombings.

On August 21 , retaliating for Israel's choke hold on the West Bank and Gaza Strip, the Palestinian Authority began enforcing a partial boycott of Israeli goods including cookies and toilet paper. Trucks carrying Israeli products were turned away by Palestinian security forces who set up roadblocks at the entrances to the autonomous Palestinian areas.

On September 4 , Three martyr bombers evidently acting in concert set off bombs on a popular shopping promenade in Jerusalem on Thursday, killing four passers-by and themselves. The three explosions followed in quick succession at about 3:10 p.m. on Ben Yehuda Street, a shady pedestrian thorough fare in West Jerusalem lined with boutiques and outdoor cafes, and packed with Israelis and foreign tourists. Officials said eight people were severely wounded, and about 180 others were also hurt.

On September 9 , United States Secretary of State Madeleine Albright arrived in Israel the first stop on a weeklong Middle East tour aimed at generating new momentum for the stalled Israeli-Palestinian peace process. Albright visited Israel, the West Bank, Egypt, Saudi Arabia, Jordan, Syria, and Lebanon before leaving the region on September 15. Albright said her efforts resulted in some progress. Palestinian authorities arrested some Islamic militants. Israel said it would unfreeze tax revenues owed the PNA and ease restrictions that prevent Palestinians from travelling between Palestinian-controlled areas-measures that were imposed in response to the recent martyr bombings.

On September 19 , Israeli troops fired rubber bullets at stone-throwing Arabs until Palestinian police intervened to stop the protests in the West Bank town of Hebron on Friday. No one was hurt in the demonstration by about 50 Palestinians against an Israeli government deal letting Jewish seminary students stay in Arab East Jerusalem buildings in place of the Jewish families who occupied them.

On October 1 , Sheik Ahmed Yassin the 61-year-old founder of the militant Islamic group Hamas was released from Israeli prison , as part of a prisoner swap touched off by a failed Israeli assassination attempt in Amman, the capital of Jordan. The events that led Israel to free Yassin unfolded on September 25 when Israeli agents reportedly attempted to poison Khaled Meshal, a senior member of Hamas, in Amman. Jordan's King Hussein I threatened to cut diplomatic relations unless the Israeli government provided an antidote to the poison and agreed to free Yassin and several dozen Palestinians and Jordanians held in Israeli prisons.

On October 8 , The long-frozen peace process thawed somewhat as Netanyahu and Palestinian National Authority (PNA) President Yasser Arafat met for the first time since February 1997. United States Middle East envoy Dennis Ross, who helped organize the October 8 meeting, said that both sides had agreed to resume negotiations.

On December 11, Palestinian census takers stand in the rain, knocking on people's doors in traditionally-Arab east Jerusalem. But many residents literally hide behind their closed doors, fearing a census which anywhere else would be an exercise in basic civics. Even answering questions as simple as "Do you have central heating?" can be risky. East Jerusalem's Palestinians do not allow themselves to be photographed, for fear that Israeli authorities will revoke their residency cards and evict them from the city where their families have lived for centuries. The first-ever Palestinian census turned into a tug-of-war over Jerusalem when Israel's government pushed a bill through Parliament blocking Yasser Arafat's census-takers from operating in the disputed city.