For the first time in three decades, Israel decided to allow Egypt to station troops in the Sinai peninsula that divides their countries, and has begun telling their world partners to tone down the rhetoric against Mubarak.
With street protests threatening the Egyptian regime, officials say that Israel allowed the Egyptian army to move two battalions - about 800 soldiers - into Sinai on Sunday. The officials said the troops were based in the Sharm el-Sheikh area on Sinai's southern tip, far from Israel.
Under the 1979 peace treaty, Israel returned the captured Sinai to Egypt. In return, Egypt agreed to leave the area, which borders southern Israel, demilitarized. The arid peninsula lies between Egypt's mainland and Israel, and Israel was worried about an Egyptian invasion then.
Complete Coverage: Anger in the Arab World
Now, as the unrest in Egypt has spread, Israeli officials have grown increasingly concerned about the stability of their southern neighbor. They are especially worried that Palestinian militants could take advantage of the unrest to smuggle weapons into the Gaza Strip through tunnels under the Egypt-Gaza border.
On Saturday, senior Israeli officials told the daily Haaretz that the Foreign Ministry issued a directive to its key embassies to start stressing the importance of Egypt's stability to the region's stability. Israeli ambassadors in the United States, Canada, China, Russia and several European countries were told to get this word out as soon as possible.
While Prime Minister Benjamin Netanyahu has banned the government from publicly discussing the situation in Egypt, he and President Shimon Peres have publicly toed the line in favor of Mubarak's regime.
Israeli President Shimon Peres said "we always have had and still have a great respect" for Mubarak. "I don't say everything that he did was right, but he did one thing for which all of us are thankful to him: He kept the peace in the Middle East."
While the official rhetoric out of Israel is about peace and stability in the Middle East, some Israeli officials privately say America and other European countries may be playing their cards wrong in regards to regional diplomacy, which is why they are asking them to tone down the rhetoric against Mubarak.
"The Americans and the Europeans are being pulled along by public opinion and aren't considering their genuine interests," one senior Israeli official told Haaretz. "Even if they are critical of Mubarak they have to make their friends feel that they're not alone. Jordan and Saudi Arabia see the reactions in the West, how everyone is abandoning Mubarak, and this will have very serious implications."
Netanyahu said Sunday that Israel is "anxiously following" the developments in Egypt - reflecting Israel's concern that Mubarak's days in power could be limited. Mubarak has been a key ally for Israel, strictly honoring the peace treaty during his 30 years in power and frequently acting as a bridge between Israel and the Palestinians to the broader Arab world.
In an interview, international Mideast envoy Tony Blair said Monday that a change in Egypt's leadership appears inevitable. "Change will happen. You can't put the genie back in the bottle now," he said.
The former British prime minister did not say explicitly whether Mubarak should step down. He said it's important that Egypt holds proper elections and that any transition be peaceful.
"People want to get to a position where the Egyptian people are able to express their will in free and fair elections," he said. "But I think the watchword is change with care, because at the same time we have to make sure any change occurs with stability and order."
In particular, he said he was concerned that unrest in Egypt could disrupt the Israeli-Palestinian peace process.
Blair represents the international "Quartet" of Mideast peacemakers - the U.S., the European Union, Russia and the United Nations - which is set to gather next week to discuss stalled peace efforts between Israel and the Palestinians.
He acknowledged the unrest in Egypt has put Western powers, especially the U.S., in the difficult position of choosing between a longtime ally and a grass roots protest movement demanding more freedom.
"I think when people criticize America over this, they're being a bit unfair," Blair said, adding that President Barack Obama has handled the crisis in "the only way he can."
"That's why the sensible thing to do is to partner the process of change and make sure we get the right change, with order," he said.
Blair said the focus of the upcoming Quartet meeting would be to get the sides talking again, a task he acknowledged has become more difficult by the situation in Egypt.
Negotiations have been stalled for more than three months because of disagreements over Israeli settlement construction in areas claimed by the Palestinians.
"I think there's one key issue really that is necessary to revive direct negotiations and get this process back under way, and that is to give credibility to the notion that we want a Palestinian state," Blair said.