The Palestine Liberation Organization's (PLO) top leadership on Saturday ordered preparations for disengagement from Israel.
Withdrawing the PLO's 1988 recognition would threaten decades of Israeli relations with the Palestinian leadership and raise doubts over ongoing security coordination between the two.
It would also be seen as a fatal blow to the two-state solution, already on life support following the White House's December recognition of Jerusalem as Israel's capital.
The PLO's Executive Committee released a statement after a three-hour meeting Saturday saying it would set up a committee to study the derecognition move.
The organization's top body was meeting for the first time since the Palestinian Central Council, another arm of the PLO, called for the step last month.
The Executive Committee, led by Palestinian Authority Chairman Mahmoud Abbas, ordered the preparation of "plans and projects for disengagement steps with the Israeli government at the political, administrative, economic and security levels."
Last month the PLO's Central Council voted to suspend recognition of Israel until it recognizes "Palestine" and halts the building of Jewish communities in Judea and Samaria.
Western countries have been lobbying senior Palestinian officials to convince them not to take such a step, multiple diplomats said.
The US considered the PLO to be a terrorist organization until 1991. In 1993, as part of the Oslo Accords, the PLO recognized Israel's right to exist in peace, accepted United Nations Security Council resolutions, and "rejected" "violence and terrorism."
However, the PLO has not kept its promise, consistently involving itself in violence and terrorism and paying terrorists stipends in proportion to their success in murdering Jews. Abbas recently declared the Oslo Accords "dead."