JERUSALEM - Seeking to build on a shaky cease-fire with the Palestinians, Israeli Prime Minister Ehud Olmert offered Monday to free prisoners, lift checkpoints and release funds withheld from the Palestinian Authority in return for decisive steps toward peace.

In one of his most conciliatory speeches, Olmert spelled out Israel's likely concessions under a final peace accord, including a withdrawal of its troops and many of its settlements from the West Bank, and the establishment of a Palestinian state.

“I hold out my hand in peace to our Palestinian neighbors in the hope that it won't be returned empty,” he said during a ceremony at the tomb of David Ben-Gurion, Israel's founding father.

The offer was a switch for Olmert, who declared during his election campaign last spring that no Palestinian leader was capable of making a deal with Israel. Since his election, he has worked to isolate the Hamas-led Palestinian government.

Palestinian leaders reacted to Olmert's initiative with caution and skepticism.