In Ramallah, there was confusion throughout the day about whether Arafat had accepted Abbas' resignation and if he had, whether his decision was final.
An Israeli warplane dropped a 550-pound bomb on a Gaza City apartment in a botched attempt to kill several top Hamas leaders, including the Islamic militant group's founder, Sheik Ahmed Yassin, who escaped with a minor injury. Hamas threatened bloody revenge, saying Israel had "opened the gates of hell" with its attack on the widely revered Yassin.
Israel declared a state of high alert Saturday evening, bracing for more attacks.
A senior Israeli military official said Abbas' resignation created a power vacuum in which Israel felt compelled to act immediately against Hamas.
Yassin was the highest-ranking Palestinian leader ever targeted by Israel, and top fugitives, including Mohammed Deif, No. 1 on Israel's wanted list, were also in the room, security officials said.
CBS News correspondent Robert Berger says Israel "upped the ante" in its war on Hamas by targeting Yassin.
"No Hamas official is immune," said Israeli Foreign Ministry official Gideon Meir, adding that "there will be other chances" to go after Hamas leaders.
Abbas condemned the Israeli strike as "criminal," saying in a statement that it "reaffirms Israel's unwillingness to take the path of peace" and will only "exacerbate the current crisis."
Another Hamas leader, Abdel Aziz Rantisi, who himself escaped an Israeli strike in June with minor injuries, promised revenge. "Israel opened the door of Hell by targeting Sheik Yassin. Our retaliation is coming soon,'' Rantisi said.
Saturday's dramatic events dealt the most severe blow in months to U.S.-led peace efforts: wrangling over an Abbas successor could freeze the troubled "road map" peace plan for weeks or months, and the attack on Yassin could provoke more Hamas suicide bombings and Israeli reprisals.
The resignation of Abbas after just four turbulent months in of office left Israel and the United States without a negotiating partner, at least temporarily, as both refuse to speak with Arafat, saying he foments terrorism.
Israeli Prime Minister Ariel Sharon warned in a statement that Israel would not do business with a government controlled by Arafat or his loyalists. "The government of Israel will not negotiate with Arafat," said Israeli Foreign Minister Silvan Shalom. "The man is part of the problem and not part of the solution. He is a factor that shakes the stability in the region."
Israel might be more likely now to make good on threats to expel Arafat.
Justice Minister Yosef Lapid, a member of the Israeli security Cabinet, said Israel has refrained from kicking out Arafat at the request of the United States. "Maybe the White House will have second thoughts now, and then we'll have to consider Arafat's presence again," he said.
CBS News Correspondent Mark Knoller says, "Not even the White House can tell for sure if the Abbas resignation has been accepted, though the U.S. is clearly concerned about the possible impact.
"In a written statement, presidential spokesman Scott McClellan says its important that all parties carefully consider the consequences of their actions. But he makes clear that the U.S. is unwilling to give up on the peace process - and remains committed to the implementation of the roadmap peace plan."
Knoller notes that President Bush "made no secret of his confidence in Abbas - calling him a leader of vision and courage. Mistrusting Arafat, Mr. Bush believed that Abbas greatly enhanced the prospect of peace between Israel and the Palestinians.
Abbas' departure certainly meant even greater uncertainty for the "road map" plan, already in serious trouble because of a major spike in violence in recent weeks and the collapse of a unilateral truce by militants.
Correspondent Berger called the resignation perhaps the "final nail in the coffin" of the "road map."
In Ramallah, it still remained unclear whether Arafat's acceptance of Abbas' resignation was final. The veteran Palestinian leader had told a large gathering of legislators and Cabinet ministers that Abbas was now heading a caretaker government, implying Arafat agreed with his prime minister's decision, but he stopped short of confirming this in writing, as required by law.
Berger says Arafat faced "a dilemma over whether to accept or reject the resignation of Abbas. If he accepted it, he could be blamed by the U.S., Israel and Europe for the collapse of the 'road map' peace plan. If Arafat rejected the resignation, he would have been forced to grant Abbas more power and control of the security forces, something he was reluctant to do."
Abbas told a closed-door session of parliament that he would not change his mind. Reading from a prepared statement, he explained why he quit. Israel, he said, had not carried out its obligations under the road map, the United States had not enforced Israeli compliance and his detractors at home had constantly undermined him with "harsh and dangerous" incitement.
Abbas, who has a reputation for shying away from confrontations, was buffeted by stronger forces, including an entrenched and embittered Arafat, Israeli leaders who gave him little to show his people, and Palestinian militants who paid little heed to his calls for ending violence.
Lawmakers said Abbas was stung by accusations, including by leaders of Arafat's Fatah movement, that he betrayed the Palestinian cause.
Abbas had been frustrated by constant wrangling with Arafat, his aides said. He was also hurt by the near-collapse of the road map and his inability to improve the daily lives of Palestinians.
Berger points out that "Abbas' peace policies won little support on the militant Palestinian street, which sees him as a puppet appointed by the U.S. and Israel. His message of non-violence is seen as weakness, especially because it has not brought any tangible change."
The U.S. Secretary for Homeland Security Tom Ridge, speaking in Italy, said he feared Abbas' resignation would delay U.S.-led peace efforts. "We just have to wait and see who the successor might be. It's clear to us that Arafat has not been a partner in this effort, has not provided a path to peace," Ridge said.
The European Union dispatched its foreign affairs chief, Javier Solana, to the region.
EU foreign ministers meeting in Italy also agreed to broaden their ban on Hamas, outlawing its political offshoots, fund-raising charities and social welfare groups. It previously blacklisted only the group's military wing.
The freezing of funds and Israeli missile strikes came following a Hamas suicide bombing on a Jerusalem bus Aug. 19 that killed 22 people.
Hassan Khreishe, a Palestinian legislator, said it was possible Abbas' resignation was a tactical step. "This could be either a move to increase pressure on Arafat, or to allow Arafat to reappoint him as prime minister so that confidence in him can be renewed," said Khreishe, of the Fatah movement.
Arafat was to meet with leaders of his Fatah movement and legislators on Sunday to consider the next move. One option is, as Khreishe suggested, to try to reappoint Abbas. This would allow Arafat to strip the Abbas Cabinet of those he doesn't support, particularly security chief Mohammed Dahlan.
A possible Abbas successor is Parliament Speaker Ahmed Qureia, a pragmatic politician who played a key role in earlier peace talks and might be acceptable to Israel and the United States. Another contender is Finance Minister Salam Fayad, widely respected for curtailing Arafat's previously unlimited access to public funds. Israeli officials said Saturday they'd favor Fayad's nomination.
Senior Israeli military officials said that despite the turmoil, peace efforts could resume, perhaps even at an accelerated pace, if Abbas were to be reinstated with full powers over security forces, and if Hamas agreed to disarm.
Neither appeared likely, though. Arafat has persistently rejected Abbas' U.S.-backed demands that he relinquish control over four of eight security branches he still runs. Hamas, meanwhile, only stepped up its threats against Israel.
In Gaza City, thousands of Hamas supporters poured into the streets, handing out sweets to celebrate the survival of their leaders. One Hamas member riding in a car led a chant over a loudspeaker: "Sharon listen very well: you bought a free ticket to hell."
In the Israeli strike, an Israeli war plane dropped its bomb through the window of a third-story apartment where top Hamas leaders had assembled — to plan more attacks, Israeli officials said.
Yassin was lightly wounded in his right hand, and 15 people were also hurt. Deif, the top fugitive, survived Israel's third attempt on his life, and his assistant, Adnan Al-Ghoul, also got away, Israeli security officials said.
The Israeli officials said Israel used a smaller bomb to avoid harming civilians. In a July 2002 attack on Hamas military leader Salah Shehadeh, a warplane had dropped a one-ton bomb that killed Shehadeh, but also 14 bystanders, among them several children, prompting an international outcry.
Bodyguards carried Yassin, a quadriplegic, out of the building and he was driven away in his brown four-wheel drive Land Rover. Yassin later surfaced at a Gaza City mosque, where he renewed threats of revenge.
Yassin, a frail, 68-year-old sheik widely revered among his followers, denied he was meeting with Hamas commanders in the targeted apartment. "Their (the Israelis') intelligence is giving them wrong information, and this is only an excuse to bombard and kill innocent people," Yassin said. "I was visiting my friend."
Israel's military often has up-to-the-minute intelligence on the movement of Palestinian militants, allowing them to launch quick strikes on leaders, often with helicopter gunships and F-16 fighter jets.