"A viable Palestinian state, as part of a negotiated and agreed settlement, which guarantees peace and security for Israel is the objective," Blair told a news conference in London after talks with Palestinan leader Yasser Arafat.
Their discussions followed by a few hours Israel's withdrawal of its tanks and troops from two Palestinian neighborhoods in the West Bank town of Hebron Monday, reports CBS News Correspondent Robert Berger. Israeli forces occupied the area 10 days ago in response to attacks by Palestinian gunmen on the nearby Jewish settlement.
At the same time, Israel has renewed its policy of targeted killings of Palestinian militants, after a lull in the wake of the terrorist attacks in the U.S.
An Islamic militant was killed Monday in an explosion in the West Bank. The Palestinians say Ahmed Marshoud, a member of the Islamic militant group Hamas, was assassinated when Israel planted a car bomb in the town of Nablus. Israel Radio confirmed that it was an Israeli hit.
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That would make it the second Israeli assassination in two days. On Sunday, Israel killed a regional Hamas leader, saying it targeted him because he helped plot a June suicide bombing that killed 22 people.
Israel says it has the right to target terrorists since the Palestinian Authority refuses to arrest them. The Palestinians say it's a violation of the U.S.-backed cease-fire.
Also Monday, Jewish settlers opened fire on Palestinian farmers, and torched two of their cars near a West Bank village, Palestinian security officials said. There were no reports of injuries.
"The end we desire...is a just peace in which Israelis and Palestinians live side by side, each in their own state, secure and able to prosper and develop," Blair said.
Arafat used the joint news conference to condemn last month's attacks on the United States and to urge Israel to resume Middle East negotiations "immediately."
Blair has said there is an urgent need to revive stalled Middle East peace moves to help neutralize attempts by Osama bin Laden Washington's prime suspect behind the September 11 suicide hijack attacks on New York and Washington to portray himself as a champion of the Palestinian cause.
Palestinian police promise to keep order in Hebron. Israeli troops, backed by tanks, had seized two hilltop neighborhoods in Hebron on Oct. 5, after Palestinian gunmen repeatedly fired from there at Jewish settler enclaves in the center of town. Troops withdrew early Monday.
Jewish settlers entered the Abu Sneineh and Harat el-Sheikh neighborhoods to try to prevent the army pullback. Twety-three settlers were detained by Israeli police, some on suspicion of assaulting soldiers, police said.
By daylight, Palestinian security forces entered the two neighborhoods, setting up checkpoints, patrolling in jeeps and taking over positions from which gunmen had fired at the settler compounds in the past, witnesses said.
Protesting the pullback, the ultra-nationalist National Union party, a patron of the settlement movement, announced it would leave Prime Minister Ariel Sharon's government.
The party has six seats in the 120-member parliament, not enough to rob Sharon's coalition of its parliamentary majority. However, the hardline Sharon might now become more dependent on the moderate Labor party to stay in power.
The Hebron withdrawal laid bare growing tensions between Israeli Defense Minister Binyanim Ben-Eliezer and armed forces chief of staff Lt. Gen. Shaul Mofaz.
Mofaz was severely reprimanded by Ben-Eliezer after the chief of staff said in a statement he opposed the Hebron withdrawal.
The Hebron pullback was the result of truce talks held on Sunday. Israel also agreed to ease some of its stifling travel restrictions in the West Bank.
The United States has been urging both sides to show restraint as the Americans attempt to build support in Arab and Muslim countries for their anti-terror campaign. The truce has been sorely tested on both sides since it was agreed on Sept 26.
On Sunday, Israeli forces shot dead Abdel-Rahman Hamad, a regional leader of Hamas living in the town of Qalqiliya. Palestinians said the killing was a grave violation of the cease-fire.
Sharon, citing Israel's right to defend itself, said Sunday that the shooting "was not the first nor the last."
The shooting of Hamad marked a return to Israel's policy of targeted killings. Over the past year, Israel has carried out dozens of such attacks against Palestinian militants suspected of violence against Israelis.
Sunday's shooting was the first since the cease-fire was declared.
Monday's explosion went off in a car parked outside a Nablus office building that is in view of an Israeli position on a nearby hilltop. The Israeli army had no immediate comment, though Israel army radio said the blast was set off by Israel.
The Palestinian governor of Nablus, Mahmoud Aloul, said Israel was behind the explosion, and that the killing was intended to sabotage truce efforts.
Hamas had no comment. However, it has vowed to avenge Hamad's death.
Hamas has carried out multiple suicide bombings against Israel, including the disco bombing, the deadliest single attack in the current round of Mideast fighting.
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