After weeks of stalemate, soldiers dismantled the Ein ad-Duyuk checkpoint on the main road west to Ramallah allowing free movement between the two cities.
Israelis also removed concrete blocks at the main checkpoint on the road south to Jerusalem, easing Palestinian traffic into the town.
Palestinian security forces erected their own checkpoint one kilometre away to clock traffic and to prevent Israelis from travelling into Jericho.
But, Israel still controls all south and north-bound traffic leaving what is one of the quietest spots in the West Bank.
On the main road north to the restive town of Nablus, cement blocks are due to be moved at a later date before armed Palestinian police will eventually patrol.
For more than four years, Israeli troops have strictly controlled all access in to and out of Jericho since the Palestinian uprising erupted in September 2000.
Chief Palestinian negotiator Saeb Erakat, himself from Jericho, called the event “a small step on a long road”.
“We hope that Israel will remove all the checkpoints in the coming weeks and that we will return to the situation as it was prior to September 28, 2000,” when the intifada broke out, he said.
But many Palestinians dismiss the deal as little more than symbolic, given that Israeli soldiers were already absent from within Jericho itself, unlike elsewhere in the West Bank.
Handing over security in Ramallah, Bethlehem, Qalqilya, Tulkarem and Jericho was a key confidence-building measure agreed at a landmark Israeli-Palestinian peace summit in Egypt early last month.
Not on the list are Nablus, Hebron, and Jenin.
Meanwhile, 13 main Palestinian factions meeting for crucial truce talks in Cairo seemed more likely to extend a cooling down period rather than agree to a full ceasefire.
The ruling Fatah party of Palestinian leader Mahmoud Abbas remained upbeat about the talks but radical faction Hamas amd its smaller rival Islamic Jihad have rejected a long-term ceasefire out of hand.
“It is not possible to agree or announce a truce during this dialogue. A cooling down period of several months is possible but not a long-term truce,” Hamas spokesman Mohammed Nazal said.
Israeli Prime Minister Ariel Sharon says all radical Palestinian groups must be dismantled.