Israeli troops shot and killed two Palestinian gunmen early Sunday during a gunbattle that lasted for hours in the divided West Bank city of Hebron, both sides said.

The latest violence came as Israel's Foreign Minister Shimon Peres said he was working to set up truce talks with Palestinian leader Yasser Arafat. The pair have been discussing a possible meeting for the past two weeks, but have failed to set a time or a place.

Peres and Israel's Prime Minister Ariel Sharon on Sunday discussed prospects for a Peres-Arafat meeting this week in Italy, according to army radio.

Israeli soldiers and Palestinian gunmen waged a firefight that began Saturday night and stretched into Sunday morning in Hebron, the scene of repeated shootouts.

Israel's military said its troops shot and killed two Palestinian militants who had been firing from a hill on a Jewish enclave in the center of Hebron.

Palestinians identified the men as Edris Ashour, 21, and Ala al-Sa'ai, 25, both members of the Tanzim militia, part of Arafat's Fatah movement. Both were shot in the head, said Dr. Hatem Edweik at Al Ahli hospital in Hebron.

"About 40 Israeli soldiers came from three different directions and began firing," said Ali Jabari, 22, who witnessed the exchange from his house.

Israel's army, which controls the center of the city, said it did not enter Palestinian-controlled territory nearby during the shooting.

In another development, George Mitchell, a former U.S. senator who led an international commission that recently examined the Mideast conflict, said recent Israeli talk about "unilateral separation" from the Palestinians was an idea filled with practical problems.

A growing number of Israeli politicians have expressed support for the notion, which could involve such measures as building a fence to separate parts of the West Bank from Israel. However, isolated Israeli settlements would presumably have to be abandoned.

"There are insuperable questions of which settlements are in and which are out," Mitchell said on ABC's "This Week."

"And it's not just the settlements themselves, it's the road network that supports them, the military installations that protect them. I think it's fraught with enormous practical difficulties," Mitchell said.

Mitchell's commission issued a report filled with recommendations on how to end the current conflict and restore peace talks. Both the Israelis and Palestinians said they accepted the findings in principle, but have yet to implement the measures.

And the violence has continued.

On Saturday, an 8-year-old Israeli child was slightly wounded when Palestinian gunmen fired on a Jewish settlement in Hebron, the army said. Exchanges of fire have broken out on several occasions over the past three days, with at least five Palestinians injured Friday.

Hebron has been the scene of repeated clashes throughout the 11 months of Mideast fighting. About 500 Jewish settlers live in several small enclaves in the city, home to about 130,000 Palestinians.

Elsewhere Saturday, two Palestinians were killed in explosions.

A powerful blast destroyed a car carrying a Palestinian intelligence official in the Gaza Strip, killing him and critically injuring a bodyguard. Palestinians blamed Israel for the attack on Tayser Khattab, but Israel denied involvement.

Khattab was driving toward his office at Palestinian intelligence headquarters north of Gaza City when his car exploded. Palestinian police said a bomb apparently was planted in the car and set off by remote control.

Khattab was a top aide to the Palestinian intelligence chief, Amin al-Hindi, and was also a Fatah member.

Also, an explosion in a taxi near the northern West Bank town of Tulkarem killed Abeer Al-Samra, 22. Palestinian security officials said they were checking, but suggested Israel was behind the blast. The Israeli army said it knew nothing about the incident.

Palestinian security officials said Al-Samra was the wife of a well-known gunman, Ahmed Tabok, a Fatah member who is currently being held in a Palestinian jail.