Israel showed signs on Thursday of bowing to demands from its closest ally, the United States, that it withdraw its forces from six West Bank cities it entered or besieged after the murder of a minister last week.
Prime Minister Ariel Sharon was to consult senior cabinet ministers on Thursday, aides said, about pulling out of the areas taken in Israel's farthest reaching military operation against the Palestinian Authority.
The consultations appeared to be a face-saving gesture in the wake of one of the most public rifts for years with the United States. Israeli radio stations said troops would start withdrawing from Palestinian-ruled areas by Friday.
Tension rose after Israel soldiers killed at least five Palestinians on Wednesday in an air, armour and infantry assault on a West Bank village. Israel said the raid was intended to arrest militants and those behind the assassination of Tourism Minister Rehavam Zeevi.
Israeli forces pulled out of the Beit Reema village early on Thursday, military sources said. But there was no word on any wider withdrawal from other Palestinian-ruled West Bank areas.
The Palestinian Authority accused Israel of carrying out a massacre at Beit Reema and declared Thursday an official day of mourning.
The bloodshed dealt a new blow to Washington's effort to sideline the Israeli-Palestinian conflict as it seeks to bolster Arab support for its anti-terrorism alliance after the September 11 attacks on the United States.
Secretary of State Colin Powell reiterated Washington's demand that Israel "immediately withdraw" its forces from Palestinian-ruled areas taken since Zeevi was killed by a radical Palestinian group last week.
Powell also urged Palestinian President Yasser Arafat "to do everything within his power" to arrest Zeevi's assassins and "get the violence down."
But U.S. pressure was clearly focused on Israel, the recipient of $3 billion in U.S. annual aid.
U.S. officials mulled the unusual step of asking the United Nations Security Council to criticise the Israeli offensive. For the past year, Washington has blocked or vetoed any Security Council action on the Middle East conflict.
Israel radio stations said the army was eager to arrest as many Palestinian militants as possible before the pressure became too much to bear and the government ended the offensive.
The violence prompted peace activists to protest outside Sharon's official residence in Jerusalem, holding banners saying "Enough to the Bloodletting." U.N. Secretary-General Kofi Annan said he was "very disturbed" by the latest violence.
At least 668 Palestinians and 177 Israelis have been killed since a Palestinian revolt against Israeli occupation began in September 2000 after a deadlock in peace negotiations.
Israel and the Palestinians offered very different versions of what happened in Wednesday's raid on Beit Reema village.
The Israeli military said all the dead were gunmen killed in fighting. Palestinian witnesses said all the dead were members of the Palestinian security forces guarding the town's entrance and that they were killed in their sleep.
Chief Israeli army spokesman, Brigadier-General Ron Kitrey, said Israel informed the Palestinian commander in the village about the raid shortly before it began and told him his forces would not be harmed if they did not fire at Israeli troops.
"All of them fired on us. Had they not done that, they would not have been killed," West Bank commander, Brigadier-General Yitzhak Gershon, told Reuters. He said 15 of his soldiers were wounded in the operation.
The army declared the village a closed military zone and banned reporters from entering as well as Palestinian ambulances and the International Committee of the Red Cross.
Israel officials said army medics treated the wounded and two Palestinians were taken to an Israeli hospital.
Witnesses said two helicopters firing heavy machineguns, more than five tanks, 15 armoured personnel carriers, troop transporters, 15 jeeps and several armoured bulldozers entered the village, near the city of Ramallah, during the night.
Dr Bassem Rimawi, a resident of Beit Reema, said all five men were "killed in their sleep in their location at the entrance to the village." "Not one single shot was fired by any Palestinian," he said.
Residents said the village had been under curfew during the raid.
The Palestinian Authority said nine people were killed.
The Israeli army said it destroyed three houses in Beit Reema which belonged to those involved in Zeevi's assassination.
A radical Palestinian group said it killed the cabinet minister in retaliation for Israel's assassination of its leader in August.
Israel launched the Beit Reema operation hours after U.S. President George W. Bush asked it in unusually undiplomatic terms to remove its forces from the Palestinian-ruled areas.
Responding to Bush's call, Sharon said Israel had no intention of staying permanently in Palestinian-ruled areas but said its forces would leave "when we are done with our mission."