The 77-year-old prime minister, whose fate is crucial to Israel and the wider Middle East, remains in intensive care but doctors said they had been able to all but stop the drugs that had been keeping him in an artificial coma.
His chief surgeon Felix Umansky said it could take months to assess the full extent of the damage Mr Sharon has suffered.
Defying expectations
But his progress so far had defied all expectations, he said, amid suggestions by some of the prime minister's allies that he could even lead his new Kadima party at a March general election.
In a further sign that politics was beginning to return to normal, the main opposition Labour party ended its moratorium on political activity in the wake of Mr Sharon's illness, declaring its election campaign up and running.
Dr Umansky said Mr Sharon was already moving "his four limbs" and showing stronger responses to stimulation.
"He is a very strong person. If someone had told me this was going to happen a week ago, I wouldn't have believed it," he told AFP.
Later in the day he said the prime minister had even appeared to respond to words of encouragement from his younger son Gilad.
"Gilad spoke to him. He said: 'I'm by your side, how are you?' and I had the clear impression that there was a reaction," Dr Umansky told Israeli television.
Dr Umansky stressed that the surgical team could not be too hasty in fully ending the prime minister's sedation, and only when that had been done could they begin to gauge whether he would fully recover his faculties.
Another member of the surgical team said he too was hopeful but added that first priority was to save the premier's life rather than worrying whether he would be able to resume his duties.
He said that there had been a slight improvement in the Israeli premier's condition and he now needed only a very low dosage of sedatives.
"Sharon's situation continues to be serious but stable," said a statement from Jerusalem's Hadassah hospital.
"During the day, there was a slight additional improvement as seen through the different neurological tests carried out by his doctors. The prime minister still needs a very low dosage of sedatives," it added.
A member of the surgical team later said Mr Sharon was not completely out of danger but added that he remained optimistic.
"The risks have lessened but it's a long process," Dr Jose Cohen told public television. "Mr Sharon is not out of danger ... but I'm optimistic.
"Everyone is wondering if he will be able to resume his functions as prime minister but the important thing is that he continues to live as he's first and foremost a human being."
Slow process
"The process is very slow and must be very well controlled. Nobody who is close to regaining consciousness likes feeling that he has a tube next to his windpipe or that he is immobilised," the Argentine doctor said.
As they try to rouse him from the coma, doctors have been conducting a series of tests to check Mr Sharon's responses to pain and sound, but Dr Umansky said it could be months before a full assessment of the damage could be made.
"To evaluate his higher intellectual functions could take weeks or months, although other functions, such as speaking will occur earlier," he said.
Israelis and world leaders have prepared themselves for the end of the Sharon era, fearing his demise would spark new turmoil in a region struggling to find the path to peace after decades of conflict.
For days doctors have doubted Mr Sharon can again lead the country, leaving Israel staring into a political void.
However the more upbeat news emerging from the Hadassah has prompted some of Mr Sharon's allies to suggest he could lead Kadima into the March 28 election.
"It will be wonderful if we really reach a situation in which he can function, communicate and be involved, and of course the minimum that we will want to do is to put him in his natural place," said Kadima's campaign manager Tzahi Hanegbi.
Mr Sharon's old right-wing Likud and the centre-left Labour parties both denounced as a "cynical" manoeuvre the idea of placing someone who may well not be able to return to work at the top of the list.
Labour leader Amir Peretz told reporters that while he sympathised with Mr Sharon, "the election is starting right now."
At a press conference near Tel Aviv, Peretz attacked both Sharon's expected successor Ehud Olmert and Likud leader Benjamin Netanyahu, pledging that only Labour could offer a genuine alternative to the current Kadima-Likud coalition.
"Bibi (Netanyahu) and Olmert are twins regarding economic issues, regarding their agenda about peace. That makes them identical twins," he said.
Meanwhile Mr Sharon's fight for life has brought his long estranged, New York-based sister back in daily touch with his family, a report said Wednesday.
Yehudit (Dita) Mendel, 80, now "maintains daily contacts with Gilad,
Mr Sharon's son, who continuously updates her on her brother's condition" by telephone to her home in Brooklyn, the top-selling Yediot Aharonot daily said.