Consumer goods are being allowed but a "blacklist" of items including weapons and materials that could have a military use will be barred or limited.

Hamas, which controls Gaza, dismissed the concessions as of no use and said the blockade should be fully lifted.

Israel says its blockade of the Palestinian territory is needed to prevent the supply of weapons to Hamas.

Israel came under international pressure to ease its four-year blockade of Gaza after nine Turkish activists were killed in a 31 May Israeli raid on a flotilla that was trying to carry aid to the Palestinian territory

The international Middle East envoy, Tony Blair, told the BBC he believed the international outcry which followed that raid persuaded it to accelerate the easing of the Gaza blockade.

"It is true to say that the Israeli government, I think, were moving towards a different policy anyway, but of course what happened has hugely accelerated the idea," he said.

'Worthless'

Under the new measures, materials such as steel, cement, certain fertilisers and chemicals will be allowed in for Palestinian Authority-approved projects that are under the supervision and for the use of the UN or other international agencies.

Aid agencies say building materials are badly needed in Gaza as the blockade has prevented much reconstruction taking place since Israel's devastating 22-day military offensive, which ended in January 2009.

The blacklist includes so-called "dual-use" items that could be used to manufacture weapons and explosives, such as ball bearings and fireworks.

Meanwhile, exports are not permitted, making it hard for the enclave's devastated economy to pick up, says the BBC's Jon Donnison in Gaza.

The sea blockade will remain and, most importantly for many Gazans, the restrictions on the movement of people remain. It is extremely difficult for Palestinians to get Israeli permission to leave Gaza.

Under its old rules, Israel allowed only a few dozen types of products, including basic food and medicine, into Gaza. Now everything will be permitted freely into the territory, except for items on the blacklist.

Mr Blair said: "These changes are significant and, once implemented, should have a dramatic influence on the daily lives of the people of Gaza and on the private sector."

But a Hamas spokesman, Sami Abu Zuhri, told the Associated Press news agency that the new policy was "worthless", adding: "The problem is not to approve new merchandise but to lift the blockade."

Our correspondent says the timing of the announcement is key, coming as it does on the eve of a visit by Israeli Prime Minister Benjamin Netanyahu to the US to meet President Barack Obama.

Israel tightened the blockade on Gaza in 2007 when the militant group Hamas seized control.

The aim of the blockade was to weaken Hamas, end rocket attacks from Gaza and get back captured Israeli soldier Gilad Shalit.

The restrictions have been widely described as collective punishment of the population of Gaza, resulting in a humanitarian crisis.

Turkish threat

Turkey has for the first time threatened to break diplomatic ties with Israel over its raid on a Gaza-bound aid flotilla.

Turkey's foreign minister said a break could only be averted if Israel either apologised or accepted the outcome of an international inquiry into the raid.

The Israeli government said it had nothing to apologise for.

Ankara curtailed diplomatic relations with Israel after the naval raid.

Turkey - which until recently was Israel's most important Muslim ally - withdrew its ambassador and demanded that the Israelis issue an apology, agree to a United Nations inquiry and compensate the victims' families.