TEL AVIV (Reuters) - A Palestinian man stabbed to death one person and wounded two others in an attack in the Israeli city of Tel Aviv on Tuesday that could undermine a fragile truce and threaten a U.S.- led peace plan.

The 23-year-old assailant was shot and arrested and left a large, bloody knife on the ground after the attack on a seaside promenade, the first by a Palestinian in an Israeli city since militant groups announced a three-month truce on June 29.

The stabbings underlined the truce´s fragility as Israeli Prime Minister Ariel Sharon met British leaders in London, and overshadowed West Bank talks at which Palestinian Prime Minister Mahmoud Abbas mended fences with President Yasser Arafat.

The attacker, who was from East Jerusalem, stabbed a security guard who prevented him entering the open-air Tarabin restaurant at around 1:30 a.m. in Israel´s main commercial city, police said.

He then stabbed two passersby as he fled along a promenade by the Mediterranean Sea. Another security guard eventually shot the Palestinian about 500 meters (yards) from the restaurant.

"We´ve got one civilian who was killed," local police commander Yossi Sedbon told reporters on the scene. "The Palestinian was shot in his legs and is now under medical care."

Sedbon did not say whether the dead person was male or female. He also did not give the victim´s nationality.

The truce declared by the main Palestinian militant groups has fueled cautious optimism that a U.S.-backed "road map" to peace will end 33 months of Israeli-Palestinian violence.

But some militant groups have pledged to ignore the cease-fire and sporadic violence has continued.

The road map, drawn up by the United States, Russia, the United Nations and the European Union, sets out reciprocal steps to end the violence and establish an independent Palestinian state in 2005.

SHARON REBUFFED IN LONDON

Sharon failed at his talks in London to convince Prime Minister Tony Blair or Foreign Secretary Jack Straw to cut Britain´s ties with Arafat.

"We still have our differences with Britain on a series of issues, including Arafat," a senior Israeli official said after Blair hosted a private dinner for Sharon. But the official described the event as "an intimate meeting between friends."

Israel accuses Arafat of fomenting violence in the 33-month-old Palestinian uprising for independence. It and the United States have isolated the Palestinian president.

Arafat denies the charge and Palestinians say it is Sharon who is blocking peacemaking progress by refusing requests to release thousands of Palestinian prisoners.

Abbas has come under fire from some Palestinians for failing to persuade Sharon to release more prisoners. He threatened to quit last week following the criticism and after what Palestinian officials said were efforts by Arafat to weaken him.

The reformist premier, appointed by Arafat in April under U.S. pressure, declared an end to the rift after talks with the president in the West Bank city of Ramallah on Monday.

"The disputes are over and things are all right," Abbas said. Saeb Erekat, a long-time Arafat ally, said all problems between Abbas and Arafat had been resolved.

"We hope we can concentrate now on the real issues of reviving the peace process, implementing the road map and going ahead with the government´s program," Erekat said. (© Reuters 2003 07/14/03)