On September 13, 1993, Israel signed a Declaration of Principles with the PLO, thereby officially (although not de facto) putting an end to hostilities between the two sides. The Declaration of Principles set up transitional PLO jurisdiction in the West Bank and the Gaza Strip and began a five-year transitional period at the end of which Israel would withdraw from Gaza and Jericho. The Declaration also stipulated that permanent status negotiations were to commence three years later over such issues as the final status of Jerusalem - which both Israel and the Palestinians claimed as a capital - Palestinian refugees, Jewish settlements in the West Bank and Gaza, security arrangements, borders, relations and cooperation with other neighbors, and other issues of common interest. According to Annex IV, Part B, Item 8, "The Regional Economic Development Program [to be set up between Israel and the PLO] may consist of... [a] Regional Tourism, Transportation, and Telecommunications Development Plan."

On August 29, 1994, Israel and the PLO signed the Agreement on Preparatory Transfer of Powers and Responsibilities. According to Article II, Item 1, "Israel shall transfer and the Palestinian Authority shall assume powers and responsibilities from the Israeli military government and its Civil Administration in the West Bank in the following spheres: education and culture, health, social welfare, tourism, direct taxation and Value Added Tax on local production...." According to Annex IV, which is entitled "Protocol Concerning Preparatory Transfer of Powers and Responsibilities in the Sphere of Tourism," Israel was to hand over responsibility for tourism in Palestinian areas to the Palestinian Authority (PA). The Annex covers tourism activities conducted by private, public, non-governmental and foreign bodies. The Annex also states that "The tourism authorities of Israel and the Palestinian Authority shall promote and encourage tourism to the region for the benefit of both sides." Thus, travel companies authorized by the PA were allowed to conduct tours that included Israel in their packages, and clearly-marked tourist vehicles originating in PA-controlled areas were allowed to proceed into Israel.

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