With feelings running high, Israel on Tuesday halted plans to tax church-owned commercial property in Jerusalem.
It follows a protest by Christian leaders who closed the Church of the Holy Sepulchre, revered as the site of Christ's crucifixion and burial.
Scores of demonstrators earlier rallied outside the locked down holy site, in support of the church closure and against the municipality tax payment demands.
After receiving a statement from the office of Israeli Prime Minister Benjamin Netanyahu, Roman Catholic, Greek Orthodox and Armenian clergy were considering their next steps, including reopening the church, Wadie Abunassar, an adviser to church leaders said.
An Israeli committee led by a cabinet minister will negotiate with church representatives to try to resolve the dispute, Netanyahu's office said.
It added that while the review is underway, work on legislation that would allow Israel to expropriate land in Jerusalem that churches have sold to private real estate firms in recent years will also be suspended.