Despite the promises, violence continued. A Palestinian killed an Israeli man and seriously wounded a second — both telephone company employees — in a shooting attack in northern Israel near the West Bank border. Security guards wounded and arrested the assailant, a member of a militia linked to Arafat's Fatah movement.
Palestinians also fired several mortar shells and homemade rockets at a Jewish settlement in Gaza and an Israeli community bordering the strip. In the West Bank, Israel razed the house of a Hamas militant who allegedly recruited suicide bombers.
A truce might help end 33 months of violence, a necessary prelude to the U.S.-backed "road map" plan aimed at establishing a Palestinian state by 2005. The plan requires the Palestinians to break up the armed groups, but Palestinian Prime Minister Mahmoud Abbas has ruled out using force for fear of civil war.
The truce deal was negotiated by Marwan Barghouti, a Palestinian uprising leader jailed by Israel for terrorist murders, and the heads of the Hamas and Islamic Jihad groups in Damascus. Barghouti, using envoys, acted on behalf of Palestinian leaders, the negotiators said.
Arafat told reporters at his West Bank headquarters Thursday that a formal announcement would be made soon. "Until now, it has not been officially decided, but we expect that in the coming few hours, there will be a declaration," he said.
Hamas and Islamic Jihad leaders in the Gaza Strip have insisted the deal is not final, while Israel and the United States were skeptical about its value.
CBS News Correspondent Robert Berger reports Israel has said it's ready to go along with a cease-fire to give the U.S.-backed peace "road map" a boost. But Israel says a cease-fire is just a first step, and all three terror groups must be dismantled.
White House spokesman Ari Fleischer said he could not confirm the deal. "Anything that reduces the level of violence is a step in the right direction," said Fleischer said. "But it's only a step."
President Bush said Wednesday that Hamas and militant Palestinian groups like it must be dismantled in order to achieve peace in the Mideast.
"The true test for Hamas and terrorist organizations is the complete dismantlement of their terrorist networks, their capacity to blow up the peace process," Mr. Bush said at a news conference with European Union leaders in Washington.
As part of the truce talks, the Palestinian militias had sought guarantees from Israel that it will halt all military strikes, including targeted killings of wanted Palestinians.
Barghouti's truce document says Israel must halt military strikes, but does not make it a condition for agreement. Nabil Abu Rdeneh, a senior Arafat aide, said that "we're still waiting for guarantees from the Americans to force Israel to stop its assassination policy," a reference to the killings of militants.
National security adviser Condoleezza Rice is to arrive later this week for meetings with Israeli and Palestinian leaders.
Israel has said it cannot give a blanket promise to halt strikes against Palestinians planning attacks as long as Palestinian security forces don't act against the armed groups.
Shortly after AP reported on the emerging cease-fire Wednesday, Israeli helicopters fired rockets at a car carrying a Hamas militant in the Gaza Strip, killing two bystanders and wounding 17 people. Among those hurt was the targeted man, Mohammed Siam, who Israel said was on his way to fire mortars at a Jewish settlement.
Israel's deputy prime minister, Ehud Olmert, said Israel would not compromise on its security. "Each time, we fear there will be a terrorist attack and it won't be addressed by the Palestinians, we will react," said Olmert.
But Cabinet Minister Yosef Lapid, head of the moderate Shinui party, said Israel should give a truce a chance. "If they will stop their terror attacks, we can stop the activities against them, and that way we can see if they … support the road map or are taking advantage of the cease-fire," he told AP.
The truce deal was negotiated over the past few weeks by Barghouti, a leader of Arafat's Fatah movement on trial for his alleged role in attacks that killed 26 Israelis.
With Israel's knowledge, Barghouti forwarded documents to Khaled Mashal of Hamas and Ramadan Shalah of Islamic Jihad in Damascus. Egyptian officials and Abbas have also been pressing the militants.
On Wednesday, Palestinian legislator Kadoura Fares announced that after weeks of intensive negotiation, "the Palestinian dialogue has resulted in a cease-fire agreement for a period of three months."
He said that if there was quiet during this period the truce could be extended. The truce covers not only Israel, but also the West Bank and Gaza Strip — a key Israeli demand. The document also demands that Israel begin releasing Palestinian prisoners.
A senior Hamas envoy was en route from Damascus to Cairo on Thursday to deliver the Barghouti document to Egypt, according to a Palestinian source, speaking on condition of anonymity.
The Damascus-based leaders of Hamas and Islamic Jihad — Mashal and Shalah — have declined public comment, while the group's leaders in the Gaza Strip said agreement was close, but has not been finalized.
"We were obliged to seriously discuss what has been proposed to us in order to take (the ship of) our people to the land of safety," said Abdullah Shami of Islamic Jihad.
Israel's security establishment questioned whether a cease-fire would hold. A deal negotiated by Hamas leaders abroad might not be respected by local militants, particularly those in the West Bank, said one official.
Hamas is under enormous pressure from the Arab world, the United States and Europe. There are efforts to dry up its funding, and Israel has made clear it will target its leaders in military strikes if attacks go on.
Hamas, Islamic Jihad and a militia linked to Fatah have carried out scores of bombing and shooting attacks against Israelis, killing hundreds of people on buses, in cafes and in public places. Hamas has been the deadliest and has set the tone.
This week, as the uprising passed the 1,000-day mark, the death toll stood at more than 2,400 on the Palestinian side and more than 800 on the Israeli side.
Even if a truce is formally declared, imposing it may be difficult. The Fatah militia which claimed Wednesday's attack on the phone company employees, for example, is composed of gangs of gunmen who often ignore Fatah leaders' commands.