Olmert said his country would be a "genuine partner" of the new Palestinian government and would consider releasing hundreds of millions of dollars in frozen Palestinian tax funds.
Palestinian President Mahmoud Abbas dissolved a coalition government between his Fatah movement and the militant Islamic Hamas group after Hamas seized control of the Gaza Strip, and announced Hamas and its affiliated groups were outlawed. He then appointed Salam Fayyad, a Western-backed economist, to form a new emergency government.
He told a conference of presidents of major Jewish organizations in New York that moderate forces headed by President Abbas right now have "a genuine opportunity" to "form a solid government,"and that this government would find "a genuine partner in Israel."
With the new change, he said Israel could ease travel restrictions on the West Bank and release Palestinian tax receipts frozen after the Hamas-led government took power last year.
The prime minister also said he would be willing to hold new talks with Abbas to discuss peace moves and other issues that were disrupted by the recent Palestinian infighting.
Olmert met with UN Secretary General Ban Ki-moon earlier on Sunday, and was expected to travel to Washington on Monday for talks with top administration officials. He will meet with President George W. Bush on Tuesday.
The United States has also responded positively to the new change in Palestinian politics, authorizing its consul in Jerusalem to spread the word that America would lift an embargo on direct assistance to the Palestinians.
Jacob Walles, the U.S. consul-general in Jerusalem who held talks with Abbas in Ramallah on Saturday, said once the new Palestinian government is sworn in, the U.S. is expected to reengage with the new government.
Also on Saturday, the quartet of Middle East peace mediators -- The United States, Russia, the European Union and the United Nations -- voiced strong support for Abbas, saying it understands the necessity and legitimacy of the decisions made by Abbas.
The Palestinians saw their worst infighting between the old mainstream faction of Fatah and the Islamic Resistance Movement of Hamas this year which was caused by Hamas' victory in parliamentary elections in 2006. To stop their civil war, Hamas unwillingly brought Fatah into a coalition government in March, but the uneasy partnership began crumbling last month over the control of security forces.
The fighting between Hamas and Fatah in the Gaza Strip ended late Thursday after Hamas completely took over all Fatah institutions there and drove scores of Fatah security commanders and political leaders to the West Bank and Egypt.