Israel has apologised to Egypt for the deaths of three Egyptian soldiers during a cross-border clash with Palestinian militants, hours after Cairo threatened to withdraw its ambassador.
Israel has blamed Palestinians from Gaza who came through Egypt's Sinai desert for killing eight Israelis after they crossed the border. The violence is testing Israel's landmark 1979 peace treaty with Egypt, already strained by the fall of long-term autocratic leader Hosni Mubarak.
"Israel deeply regrets the deaths of the Egyptian officers," Israeli defence minister Ehud Barak said.
The statement came after Egypt threatened to recall its ambassador to protest against the killings of its soldiers. The Egyptian government put an announcement on its website overnight saying it had pulled the envoy, but later backtracked and said it was only considering the move.
On Thursday, the militants who crossed from Egypt launched a series of attacks on cars and buses in Israel's south.
Egypt said the three soldiers were killed in an Israeli airstrike along the Israel-Sinai border in response to the attacks. Israel said there was an exchange of fire between its soldiers and "terrorists" on the Egyptian border.
Egypt's interim government accused Israel of violating the peace treaty by killing the soldiers and demanded an apology.
The deadly attacks and Israel's response have strained what was always a cold peace between the neighbouring states.
Egypt became the first Arab nation to make peace with Israel in 1979. And Israel valued Mubarak as a source of stability with shared interests in containing Iran and its radical Islamic proxies in the region, including the Hamas militants who run Gaza.
The agreement called for Israel to return the captured Sinai to Egypt. In return, Egypt agreed to certain restrictions on the number of troops placed in Sinai.