Sharon also said some West Bank outposts that Israel is supposed to dismantle under the "road map" plan are vital to security, according to a senior Cabinet official, who spoke on condition of anonymity.
The comments came as international mediators, meeting at an economic conference in Jordan, tried to find ways to salvage the peace plan. Hamas attacks on Israelis and Israeli strikes against the militants have persisted — even as Palestinian officials were trying to persuade Hamas and other militant groups to halt attacks.
On Saturday, Israeli soldiers shot and killed Abdullah Kawasme, the senior Hamas leader in the West Bank city of Hebron, while trying to arrest him. Military sources said he was armed with a rifle and did not heed an order to stop.
Secretary of State Colin Powell said the killing of Kawasme could set back the U.S.-backed peace initiative for the region, but stopped short of condemning the act because he lacked details.
Powell has said Israel is justified in going after "ticking bombs" — militants preparing to commit a terrorist act. On the other hand, he has said Israel should show restraint in situations that do not meet that criteria.
"We can't allow ourselves to be stopped because of these incidents," Powell told a news conference in Jordan.
Palestinians called the killing an assassination, and one witness, Mohammed Nasser Eddin, 26, said Kawasme was unarmed. Nasser Eddin said Kawasme had just gotten out of a taxi outside a mosque when three vans approached from different directions.
"He (Kawasme) started to run into a field, and then there was shooting from one of the vans, and then a lot of army jeeps came to the area and they (soldiers) told us all to go inside the mosque and not leave."
The killing highlighted a key sticking point in implementing the road map. Militant groups say they will only halt attacks if Israel calls off military strikes, including targeted killings. Israel has refused, saying it will not compromise on security and that it reserves the right to go after so-called "ticking bombs."
In the past, the term was understood to mean assailants about to carry out attacks, but Israel has adopted a much broader definition that includes planners of bombings and shootings. The United States has not accepted the broader definintion.
Israel accuses Kawasme of masterminding a number of deadly attacks that killed more than 40 Israelis, including 17 who died in a June 11 suicide bombing in Jerusalem.
Israeli Defense Minister Shaul Mofaz told Cabinet ministers that "Kawasme is a classical ticking bomb, in fact an assembly line of ticking bombs."
Speaking at the Cabinet meeting, Sharon called the killing of Kawasme "successful and very important" and warned that if the Palestinian Authority continues to avoid taking "serious counter-terrorist actions ... we will continue with our actions to bring security to the people of Israel."
Palestinian officials accused Israel of trying to undermine their efforts to win a Hamas pledge to stop attacks. "Israel aims to sabotage the possibility of reaching a common Palestinian understanding among the Palestinian factions," Ziad Abu Amr, the Palestinian minister in charge of negotiating a truce, said late Saturday.
Hamas' military wing promised "immediate reaction" for Kawasme's death. "There will be a retaliation," said Hamas spokesman Abdel Aziz Rantisi, who survived a recent Israeli missile strike against him.
Israeli forces imposed a curfew in Hebron, which remained in effect Sunday.
A total of 42 Palestinians — four of them assailants and others militants and civilians — and 27 Israelis have been killed since President Bush launched the road map at a June 4 summit.
The plan, a blueprint for ending 33 months of violence and establishing a Palestinian state by 2005, has been hobbled by deadly bombings, shootings and missile strikes.
Powell, Russian Foreign Minister Igor Ivanov, EU foreign policy chief Javier Solana and U.N. Secretary-General Kofi Annan — the so-called quartet who drafted the road map — met Sunday in Jordan to discuss ways of rescuing the plan.
Bush could also send National Security Adviser Condoleezza Rice — whom he has called his "personal representative" to the Mideast peace process — to the region as early as next week, administration officials said Saturday in Washington.
The visit would be the latest in a series of high-level U.S. efforts to bolster the road map. Powell met Friday with Sharon and Palestinian Prime Minister Mahmoud Abbas, and U.S. envoy John Wolf has been shuttling between the two sides.
In the first stage of the plan, the Palestinians must dismantle armed groups, while Israel must freeze Jewish settlement building and gradually withdraw to positions held before the outbreak of fighting in September 2000.
At Sunday's Cabinet meeting, Infrastructure Minister Yosef Paritzky came under fire from fellow ministers for asking his ministry to prepare a plan for resettling West Bank settlers in Israel's northern Galilee region and the southern Negev Desert.
One minister proposed moving settlers from smaller settlements to Ariel, the second largest settlement in the West Bank, according to a senior Cabinet official, who briefed reporters.
Sharon was then asked whether construction in Ariel was still possible, the Cabinet official said. Sharon said there was no need to make a big deal every time a building permit is issued. "We just build," the Cabinet official quoted Sharon as saying.
The Haaretz daily quoted Sharon on its Web site as saying Israel could continue building in the West Bank and Gaza, "but should not celebrate the construction."
Sharon's aides were not immediately available for comment.
Sharon also suggested Israel would not remove all the unauthorized settlement outposts in the West Bank, saying some are vital for Israel's security, the Cabinet official said.
Israel has pulled down 11 of more than 60 outposts in the past two weeks. However, Israeli peace activists say settlers have already erected eight new outposts since then.
"The decision to dismantle outposts will be judged on each outpost's merits," said Sharon spokesman Raanan Gissin.