The new policy is a response to mounting calls to ease Israel's four-year siege on Gaza after Israeli forces deadly raid on the Freedom Flotilla.
The decision was formally announced following a meeting between Israeli Prime Minister Benjamin Netanyahu and Middle East Quartet envoy Tony Blair, who has been spearheading discussions on easing the blockade.
The announcement came ahead of a planned July 6 meeting in Washington between Netanyahu and US President Barack Obama, who has called the humanitarian situation in Gaza "unsustainable."
Egypt, which has largely kept its own Rafah crossing with Gaza closed since 2006, earlier this month opened it for students, patients, visa-holders, and additional humanitarian aid.
Currently thousands of products, such as toilet paper and ginger are listed by Israel as constituting a "security" risk and prevented from reaching Gaza's 1.5 million residents.
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