The army said on Friday removal of the strict blockade it imposed on Jenin in August - after a truce declared by Palestinian factions collapsed under Israeli pressure - was "in keeping with assessments of the security situation".
Jenin, a hotbed of resistance to Israeli occupation and the scene of heavy fighting in April 2002, has been surrounded by Israeli forces for nearly three years of clashes.
Residents said routes were opened between the city's eight entrances and surrounding villages after Israeli troops dismantled roadblocks and tanks pulled back.
The apartheid wall, which Israel says is stopping bombers from reaching its cities, looms several kilometres to the north and northwest.
Palestinians call the project, which has drawn international condemnation, a land grab aimed at denying them the contiguous state they hope to establish in the West Bank and Gaza Strip.
Israel is meant to ease its harsh restrictions on Palestinians under a US-backed peace "road map" bogged down by persistent violence and accusations that both sides are not fulfilling their obligations.
Palestinians are supposed to crack down on resistance factions while Israel freezes illegal settlement growth on territory captured in the 1967 war and dismantles unauthorised outposts.
Months of raids by occupation
forces have left much destruction
Jenin's Palestinian governor, Ramadan al-Batta, said the army's decision was made without any security coordination with his side and he feared this reflected a new Israeli unilateralism that would marginalise Palestinians.
Israeli Prime Minister Ariel Sharon has told Palestinians that if they do not stop attacks and enter road map talks within a few months, Israel will unilaterally draw security boundaries stripping them of some of the land they seek for a viable state.
But Palestinian Prime Minister Ahmed Quraya and Egyptian mediators have failed so far to coax Palestinian factions such as Islamic Jihad and Hamas into a renewed truce with Israel.
The resistance groups say this is impossible until Israel stops attacks on its members and civilians, which they blame for the collapse of their unilateral truce last summer.