Sunday's announcement comes on the eve of a visit to the country by outgoing US Secretary of State Colin Powell.
Palestinian election officials publicly urged Israel on Saturday to redeploy troops and curtail military operations for the 9 January ballot to choose a successor to Yasir Arafat, who died of an undisclosed illness on 11 November.
Israeli newspapers reported that Powell would echo that call after arriving in Jerusalem on his first such visit for 18 months. He will meet Israeli and Palestinian leaders on Monday.
"If there is a formal request we will deal with it," a senior Israeli official said. "It would be brought to the cabinet, which would consult the security services."
Israel says its network of roadblocks in the West Bank and raids on Palestinian territories are necessary to stop resistance fighters from entering the country.
However, the official said Israel intended to "facilitate and expedite" the holding of a free election.
Powell's visit follows a pledge by US President George Bush to capitalise on what he called new opportunities for peace in a post-Arafat era.
British and Russian Foreign Ministers Jack Straw and Sergei
Lavrov are due in the region later in the week, in a sign of a
renewed international effort to revive a violence-stalled peace "roadmap".
But there appears to be little chance of any immediate breakthrough in breathing new life into the plan, which calls for an end to bloodshed and the start of mutual steps, leading to the creation of a Palestinian state by the end of 2005.
Yasir Arafat died on 11 November
Powell is a lame duck having announced his resignation last
Monday and he is due to spend less than 24 hours in Israel and the West Bank.
He will be replaced by national security adviser Condoleezza
Rice, who has been on the frontline of the Bush administration's contacts with Israeli Prime Minister Ariel Sharon.
While holding out the prospect of talks with a new Palestinian leadership, Sharon has said he intends to press on with a unilateral pullout from Gaza and parts of the West Bank in 2005.
Palestinians want Israel to coordinate the withdrawal with
them, and have voiced deep suspicions about the "disengagement", which Sharon has said entails keeping large West Bank settlement blocs under Israeli control forever.
Palestinians began registering candidates on Saturday for the election, the first such poll since 1996.
The ruling Fatah faction is due to discuss on Sunday whether the new head of the Palestine Liberation Organisation, Mahmud Abbas, would run as its sole candidate.
Mahmud Abbas is considered one
of the election front-runners
Abbas does not have a strong power base among Palestinians, but he would be a front-runner if chosen by Fatah.
Another potential contender could be the popular Fatah leader Marwan al-Barghuthi, who is serving five life terms for the killings of Israelis during the uprising. Al-Barghuthi denies the charges.
Popular Islamic group Hamas is not expected to field a candidate, as the group wants parliamentary and municipal elections as well.
Two independent candidates have announced plans to run in the poll.