The breakdown followed an Israeli naval raid on a Gaza-bound flotilla that killed eight Turkish citizens and one Turkish-American. In the aftermath of the raid, Turkey became one of the strongest critics of Israeli actions in Gaza.

The Israeli official said today the two sides agreed that Israel would compensate the families of the flotilla victims. Turkey would waive legal claims against Israel over the raid and diplomatic ties would be upgraded.

The official says this is a step toward a final agreement. He spoke on condition of anonymity because he wasn't authorized to speak to the media about the diplomatic talks.

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