Arafat himself struck a conciliatory tone, but stopped short of making a specific cease-fire offer. "We say to the peace supporters in Israel that we extend our hand to you to revive peace," Arafat said in a speech to about 2,500 Palestinians at his battered West Bank headquarters.
In the West Bank town of Dura, meanwhile, Israeli troops killed an Islamic militant fugitive in an arrest raid. Such raids have triggered revenge bombings by Islamic militants in the past.
Israel's Haaretz newspaper identified the fugitive as Majid Abu Dosh, part of the Jihad leadership in the Hebron area. The paper said he threw down his rifle as he tried to flee the house surrounded by Israeli soldiers
Arafat and his designated prime minister Ahmed Qureia are not in touch with the Israeli government on a proposed truce, officials said. But there are high-level contacts between the Palestinian Authority and the militant group Hamas on a new cease-fire, said a senior Palestinian official, speaking on condition of anonymity.
Palestinian officials have said they were given to understand by the United States that it backs the idea of a mutual truce, provided it is followed by some action against the militants, such as a weapons roundup.
Hamas has been weakened in recent weeks, both by Israel's targeted killings of leaders and fugitives and by attempts by the United States, the European Union and the Palestinian Authority to stop the flow of funds to the group.
Hamas, Islamic Jihad and militants linked to Arafat's Fatah movement declared a unilateral halt to bombings and shootings in June, but the truce collapsed last month in a new flareup of violence.
Israel had been suspicious of the unilateral and temporary cease-fire, saying it was a ruse to allow militants to regroup — and the Palestinian Authority to sidestep the requirement of the U.S.-backed "road map" peace plan to dismantle the groups. Israeli troops carried out several deadly arrest raids during the unilateral truce, prompting revenge attacks by militants.
Arafat's national security adviser, Brig. Gen. Jibril Rajoub, said Tuesday that the Palestinians would soon propose to the Israeli government a more comprehensive — and permanent — cease-fire — but warned it would only work if both sides agreed to it.
"There must be a mutual cease-fire based on an end to violence on both sides, Israelis ending their aggression against the Palestinians and the Palestinian Authority implementing a cease-fire in its territories," Rajoub told The Associated Press.
Rajoub also made his proposal on Israel Radio, saying: "I turn in a clear and straight manner to every resident and citizen in the state of Israel ... your concerns are the concerns of every Palestinian, but we are living under occupation ... the terrorist infrastructure is the occupation."
Rajoub said there were no contacts yet between Israeli and Palestinian officials on the issue. He did not address a possible crackdown on the groups.
Israel's security Cabinet decided last week, in response to twin Hamas bombings that killed 15 people, to reject any Palestinian truce offer.
Raanan Gissin, an aide to Prime Minister Ariel Sharon, said Israel wants to see the Palestinian Authority take action against militants before agreeing to a truce.
The decision on rejecting any truce offer was part of a session in which the Cabinet also decided in principle to "remove" Arafat as an obstacle to peace. Israeli government officials later said possible action, to be decided on at a later time, could include expulsion, assassination or complete isolation.
Israeli lawmaker Yuval Steinitz, who is in Washington for meetings with Bush administration officials, including National Security Adviser Condoleezza Rice, said that "there is no need to give a chance to a ceasefire that does not include dismantling all the armed groups, all the terrorist groups."
Arafat said Israel's position shows Prime Minister Ariel Sharon is not interested in making peace. "When has Israel ever accepted a truce and when has Israel ever accepted peace?" said Arafat.
The incoming Palestinian prime minister, meanwhile, decided to give Arafat and his ruling Fatah party considerable say in the composition of the new Cabinet.
Sixteen of the 24 ministers in Qureia's new Cabinet will be appointed by Fatah councils controlled by Arafat, officials said Monday.
Hani al-Hassan, a Fatah member close to Arafat, said it was not decided whether Fatah would appoint the ministers directly or offer Qureia a list of candidates to choose from. The other eight ministers would represent different movements or independents.
Outgoing Palestinian Prime Minister Mahmoud Abbas, who was backed by Israel and the United States, resigned Sept. 6 after four months in office marked by frequent disagreement with Arafat over the control of security forces and Cabinet appointments. Qureia has told confidants he has no intention of challenging Arafat, who selected him for the job last week.
Raanan Gissin, a spokesman for Sharon, said the Palestinians face a choice between sticking with Arafat or establishing a state. "The two won't go together," he said.
The U.S. government has said Arafat should be sidelined but not sent into exile.
Meanwhile, international condemnation of Israel's decision to "remove" Arafat gained momentum, as the U.N. Security Council prepared to vote on the resolution Tuesday after a day of heated debates.
The revised resolution also condemns Palestinian suicide bombings in the apparent hopes of securing British and German support and avoiding a U.S. veto, council diplomats said, speaking on condition of anonymity.
However, Israel hopes the U.S. will veto the resolution, reports CBS News Correspondent Robert Berger, and wonders why, until now, the council has never mentioned the many suicide bombings against Israelis.
Addressing the body, Israeli Ambassador Dan Gillerman outlined Israel's case against Arafat. He accused the council of "hypocrisy" for considering the Palestinian resolution while not convening to discuss Palestinian suicide bombings and shootings.
"Global, indiscriminate terrorism is made by Arafat and invented by Arafat," Gillerman said.
The Palestinian envoy, Nasser al-Kidwa, left the council chamber when Gillerman began to speak.