Nablus, West Bank - The downtown streets in this Palestinian city bustle with pedestrians and echo with the bleating of taxis vying for road space.

During the recent Palestinian uprising, activity in the second-largest city and commercial capital of the West Bank was choked off by Israeli security roadblocks and frequent gunfire from roaming militant gangs. But for the first time since 2000, the Israeli military has loosened movement restrictions around Nablus, opening up the city to Palestinians around the West Bank and to Arab citizens of Israel who come to shop.

"Work is great. We have not had this amount business in years," says Hamada Abu Islam, a toy-store owner in central Nablus who attributed the change to improved local law enforcement and the easing of Israeli checkpoints near the city. "I hope it will stay this way."

While the Israeli military says the relaxation stems from better-performing Palestinian security services, the move follows weeks of an open diplomatic rift between the Jewish state and the Obama administration over West Bank settlement expansion.

On Monday, Israeli Defense Minister Ehud Barak and US Middle East envoy George Mitchell held their second meeting in eight days in an effort to smooth differences over settlements and restarting peace negotiations.

'Ray of hope'

Is the relaxation a signal that the government of Prime Minister Benjamin Netanyahu is serious about peace, or a maneuver aimed at placating President Obama and Palestinians?

The reaction is mixed in downtown Nablus, where "martyrdom" posters of Palestinian militants have been removed, but the prominent clock tower is still scarred by bullet holes. While the improved conditions prompted businessmen to open the first cinema in 25 years, the downtown mall where it's located hasn't rented out most of its shops.

"We're optimistic, but cautiously so," says Farouk Masri, whose family owns the Cinema City movie house, which is decorated with posters of Charlie Chaplain and screens Egyptian films. "We're not counting on an improvement of the political situation. It's still a risk and we are aware of it."

Once infamous for its lawless gangs, Nablus is now drawing local tourists. Every Saturday over the past month, 10 buses from Israel have ferried visitors into the city.

Hussam Khader, a political leader from the Fatah Party of Palestinian President Mahmoud Abbas and a resident of Nablus, says the change has given Palestinians a "ray of hope" for statehood.

But he doesn't see Mr. Netanyahyu's peace intentions as genuine, because of the settlement expansion policy.

"He is very clever and dangerous," he says. "He is opening up checkpoints. That is what we are asking for. But he is setting up more settlements and stealing thousands of dunams of land."

Israeli army spokesman Maj. Avital Leibovitch said the army has only 18 staffed crossings in the West Bank, compared with 35 several years ago. (The United Nations says there are hundreds of roadblocks around the West Bank.)

"We are talking about a process of stability," says Major Leibovitch. "People are living better and working more."

At the Hawara checkpoint, a former attack flashpoint where Palestinians would spend hours trying to cross, soldiers now wave through traffic.

"It takes only five minutes to cross," says Ibrahim Huwari, a social worker. "They surrendered to the people's desire to continue to continue walking and living. Whether there is a peace process or not we will remain on our land, but such measures facilitate a resumption of talks."