Meanwhile, leaders of Palestinian militant groups were holding talks in Cairo aimed at formalizing an unofficial truce with Israel, reports CBS News Correspondent Robert Berger. A formal cease-fire would give a boost to moderate Palestinian leader Mahmoud Abbas, who has promised to end violence and return to peace talks with Israel.
However, Israel says a cease-fire is not enough. It has warned Abbas that if he fails to dismantle militant groups, they'll be able to blow up the peace process when they see fit.
The largest militant faction, Hamas, said it would not join the Palestinian government after parliament elections in July despite an expected strong showing because it doesn't support the Palestinian Authority's policies. The growing political clout of Hamas has raised concerns that the group will be able to sabotage Israeli-Palestinian negotiations, even if it halts violence.
The head of Israel's Shin Bet security service, meanwhile, said militant Jews in Gaza Strip settlements see Prime Minister Ariel Sharon's assassination as a legitimate means to block their evacuation, Israel Radio said.
At a meeting late Monday, Israeli Defense Minister Shaul Mofaz and Palestinian Interior Minister Nasser Yousef worked out a compromise over Jericho, Israeli and Palestinian officials said.
Agreements on a handover have been reached before in principle, but disputes over Israeli roadblocks and territory to be transferred prevented implementation. The delays clouded a positive atmosphere following a Feb. 8 Mideast summit at which both sides declared an end to violence.
The Palestinians agreed Israel could keep a roadblock at the entrance to the quiet oasis town in the Jordan Valley for another month. The Palestinians said the roadblock would then be removed, while Israeli officials said no commitment has been made yet.
Israel will relinquish control of Al Awja, a village north of Jericho that straddles a highway used by Israelis, and armed Palestinian police will patrol there, Palestinian negotiator Saeb Erekat said.
Israel also agreed to hand over the town of Tulkarem, next to the line between Israel and the West Bank, a few days after Jericho, Erekat and Israeli officials said. Israel Radio said the transfer would take place Sunday. That would be followed by Qalqiliya, just south of Tulkarem on the Israel-West Bank line.
In all, Israel is to hand over five West Bank towns, but no agreement was reached Monday on a timetable for Bethlehem and Ramallah, the seat of the Palestinian government.
Abbas' promise that he'll free a top Palestinian militant held in a Jericho prison has soured relations with Israel somewhat. The militant was jailed for masterminding the killing of an Israeli Cabinet minister a few years ago. Israel warned that if he's freed, confidence buildings measures such as releasing Palestinian prisoners and further West Bank pullouts will be stopped.
Agreement on Jericho and Tulkarem came ahead of Abbas' trip to Cairo Tuesday for a crucial meeting of Palestinian factions.
Abbas hopes several days of talks will produce a formal cease-fire declaration. For now, the militant groups only agree to observe an informal truce, provided Israel halts military strikes, arrest raids and targeted killings of fugitives. Islamic Jihad, the smallest of the three groups, killed five Israelis in a suicide bombing in Tel Aviv on Feb. 25, in response to what it said were perceived Israeli violations.
Egyptian officials have been mediating among the factions — Islamic Jihad, Hamas and the Al Aqsa Martyrs' Brigades, which has ties to Abbas' ruling Fatah movement.
United Nations chief Kofi Annan, who is in the region and met with Abbas on Monday, said the Palestinian leader "is looking forward to the (Cairo) meeting today and hopes they will be able to come to an understanding on a cease-fire."
Sharon has cast doubt on the Cairo truce effort. "The cease-fire the Palestinians are working on does not give up the terrorism option and is not a solution, and we cannot agree to that," he said.
Erekat said the Palestinians are committed to stopping violence against Israelis. "We will deliver on this. We hope that the Israeli side will reciprocate by stopping all military activities against all Palestinians anywhere," he said.
Hamas, which has carried out dozens of suicide bombings against Israel since its founding in 1987, opposes peace talks and remains committed to Israel's eventual destruction.
Mohammed Nazzal, a Hamas delegate in Cairo, said that "our goal is not to reach the (Palestinian) authority or to take (control of) the authority because ... we think that the political framework of the Palestinian Authority is a framework that contradicts our policies," he said in a telephone interview.
Sharon, meanwhile, faced his own internal problems over his plan to evacuate all 21 Gaza Strip settlements and four from the West Bank in the summer
The head of Israel's security service, Avi Dichter, told senior government officials that extremist settlers from Gaza are liable to use violence to try to block their evacuation, and see the assassination of Sharon as a legitimate means to that end, Israel Radio said.
Dichter said settlers slated for evacuation are afraid radicals among them will carry out extreme acts of violence. The incoming military chief, Maj. Gen. Dan Halutz, and Police Commissioner Moshe Karadi voiced similar concerns, the radio report said.
Hard-line Israelis have also been mounting a campaign to enlist soldiers to disobey orders to take part in the evacuation. On Monday, the military's human resources division distributed to commanders a scale of penalties for recalcitrant soldiers. Penalties range from warnings to possible demotions and discharge from the service.