Since the conclusion of the Oslo Agreement in September 1993, the international community has been providing humanitarian and development assistance to Palestinian people. The assistance, amounting to $6.5 billion until 2004, aims at improving living conditions and supporting economic self-reliance and institution building of the Palestinian Authority. It is obvious that “confidence building" and “reconciliation" between Palestine and Israel are the final goal for the assistance. However, they are the most difficult and challenging issues at the same time. JICA has been implementing technical assistance for the Palestinian Authority since 1993. JICA recognizes the “confidence building" projects as a priority target, although there are some constraints that derive from its historical background and political situation. In order to tackle them, it is necessary to understand the unique situation of the region. This paper seeks to identify the difficulties and challenges for the “confidence building" and “reconciliation" and to propose possible assistance in the future.