JERUSALEM - Israeli and Palestinian leaders argued on Tuesday over a planned troop pullback from the West Bank, with a wary Israel saying it wants to hand over one town at a time and Palestinians insisting on a large-scale withdrawal.

Israel decided to slow the planned pullout from five West Bank towns after a day of violence Monday strained an informal cease-fire. Israeli security officials threatened to stop the process altogether if Palestinians don´t halt all attacks on Israeli targets.

Despite the warning, Palestinian militants fired three mortar shells at a Jewish settlement in Gaza on Tuesday. The shells caused no damage or injuries.

Israeli Defense Minister Shaul Mofaz met late Monday with Palestinian negotiator Mohammed Dahlan to discuss a handover of West Bank towns to Palestinian security control.

The meeting was overshadowed by the death of a 10-year-old Palestinian girl in a Gaza refugee camp, followed by a barrage of mortar attacks on nearby Jewish settlements. A day later it was still unclear who fired the fatal bullet, with each side blaming the other.

On Tuesday, Israeli media reported that Palestinian security had arrested a man from the Rafah refugee camp for firing the fatal shot. In telephone calls with The Associated Press, officials from all the security services in Gaza denied the reports.

After the mortar attacks, Mofaz told Dahlan progress in the West Bank depends on quiet in Gaza.

He said Israel would withdraw from one West Bank city at a time rather than all five at once, Israeli security officials said. The pullout is to begin with Ramallah, the seat of the Palestinian government, the officials said on condition of anonymity.

The handover might begin in coming days, but not necessarily before Israeli Prime Minister Ariel Sharon and Palestinian leader Mahmoud Abbas hold their first meeting, tentatively set for Feb. 8, the officials added. Sharon is to meet with senior government ministers Thursday to discuss the handover.

On Tuesday, Mofaz called on the Palestinian Authority to stop the mortar fire. Thousands of Palestinian police have taken up positions throughout Gaza in recent days to restrain militants.

"So far we have not seen active operations by the Palestinian forces," Mofaz said. "We expect such activity to be undertaken. ... If the current reality continues, or heaven forbid, gets worse, it will be very hard for us to make progress with the dialogue."

Palestinian negotiator Saeb Erekat said the Palestinian police "will exert every possible effort to stop such firing."

Israeli security officials said Mofaz proposed a joint committee that would deal with the issue of Palestinian fugitives. He said in areas under Palestinian control, Israel would not pursue them as long as they turn in their weapons, stay in the town and do not plan new attacks.

Palestinians objected to the new Israeli position on the West Bank handover, with one senior Palestinian official saying they sought a withdrawal from all five cities at once. He spoke on condition of anonymity.

Dahlan said Tuesday he hoped to reach an agreement with Israel on the pullback and other key issues before next week´s summit.

"We hope to reach a deal to open the cities and the roadblocks in order to make connections between the Palestinian residential areas," Dahlan said.

In a step toward that goal, Israel reopened the Rafah crossing between Gaza and Egypt on Tuesday. It was shut Dec. 12 after Palestinian militants tunneled under the Israeli army post there and blew it up, killing five soldiers.

Mofaz said the Karni crossing - where militants killed six Israeli civilians last month - would remain closed until the Palestinians improve security measures. The Erez crossing in northern Gaza also will remain closed.

The flare-up in Gaza fighting has tested an informal cease-fire worked out by Abbas that brought rare calm to an area torn by four years of bloodshed.

Also Tuesday, Israel´s attorney general overturned a secret government decision to seize Jerusalem land belonging to Palestinians living in the West Bank, ruling it violates Israeli and international law.

The decision blocked what attorneys for the landowners said was an attempt by Israel to confiscate thousands of acres of Jerusalem land and cement Israeli control over the eastern sector of the city, whose fate is one of the most difficult issues in any future peace talks.

In another development, 38 Jewish families in Gaza signed agreements with the government to move within Israeli borders, Sharon´s office said.

The deal affects a small percentage of the 8,500 Jewish settlers in Gaza, but represents a chink in what settler leaders said would be mass resistance to an Israeli withdrawal.

An Israeli official said the government will help the settlers relocate to areas within Israel, but will not sanction the move of entire communities to settlements in the West Bank. (Copyright 2005 Associated Press. 02/01/05)