At a meeting of security chiefs on Saturday, Israeli Defence Minister Shaul Mofaz said Israel now considered that Islamic Jihad had broken the informal truce that it had been observing along with other armed groups and that Israeli military operations against its leaders would therefore resume.
The minister's statement came after a Palestinian - said to be a member of the Islamic Jihad - in a videotape claimed to have triggered the blast.
Mofaz also accused that Syria had a hand in the blast - a charge that Damascus vehemently denied.
"Syria has no connection with this operation and the Damascus office of Islamic Jihad is closed," a Syrian Foreign Ministry official said.
"We think that the Israeli defence minister's comments show that he knows the identity of the real perpetrator and that he is to be found inside Israel.
The official added, "Israel is known around the world for sabotaging any peace process."
For his part, the Israeli defence minister maintained there was a Syrian hand behind the blast. "We have proof directly linking Syria to this attack," Mofaz said.
Mofaz also announced Israel's decision to freeze plans to transfer security control of West Bank towns to the Palestinian Authority until there was a crackdown on Islamic Jihad.
"The defence minister said that at this point the process of transferring Palestinian cities to Palestinian control is frozen until Israel ... evaluates whether Palestinian President Mahmud Abbas' government is indeed taking the necessary steps against Islamic Jihad and other terror groups," an Israeli Defence Ministry spokeswoman said.