Dozens of Israeli tanks patrolled the deserted streets of this key West Bank city Wednesday, waging sporadic firefights with bands of Palestinian gunmen. Hours later, Palestinians said the Israelis had begun pulling out after the two-day incursion.

The Israeli military would not confirm that a pullout was underway. Military sources said there was some movement of forces.

A pullback would signal the easing of a major operation in Ramallah and of intense military pressure on the Palestinians just hours ahead of a new U.S. peace effort.

On Wednesday, Israeli forces and bands of Palestinian gunmen clashed on the nearly deserted streets, leaving a senior Palestinian security officer, an Israeli soldier and an Italian photographer dead.

In the Gaza Strip, Israeli soldiers shot and killed a Palestinian after he opened fire on an Israeli vehicle. Late Wednesday, two Palestinians entered Nahliel, a Jewish settlement northwest of Ramallah, and stabbed a settler, seriously wounding him, settlers and the military said.

Israel's operation in Ramallah was part of its most expansive military operation since its invasion of Lebanon in 1982. Army chief Lt. Gen. Shaul Mofaz told a parliamentary committee Wednesday that about 20,000 Israeli soldiers were stationed in the West Bank and Gaza Strip.

Around the same as the Ramallah pullback, witnesses in Bethlehem said two Israeli tanks moved up a main road in the West bank town as armored vehicles took up positions in the adjacent Aida refugee camp.

With U.S. envoy Anthony Zinni due in the Mideast on Thursday, President Bush criticized the forceful Israeli reaction to Palestinian terror attacks, saying "It's not helpful what Israel has recently done." While Israel has a right to defend itself, "the recent actions are not helpful," he said.

Avoiding any perceptible tilt to one side, White House spokesman Scott McClellan called on the Palestinian Authority "to do everything it can" to stop attacks on Israel and chided Israel for attacks on the West Bank and in Gaza that injured civilians.

Elsewhere on the diplomatic front, Palestinians cautiously welcomed a U.N. Security Council resolution endorsing a Palestinian state. Israel praised elements of the measure, but refrained from commenting directly on the statehood issue.

International diplomatic efforts have mounted as the Mideast endures its bloodiest stretch since fighting erupted in September 2000. However, there is widespread skepticism that they can quickly reverse the momentum of recent fighting, which has included multiple Palestinian suicide bombings and a half-dozen Israeli incursions into Palestinian towns and refugee camps.

More than 160 people have been killed on the Palestinian side and almost 60 have been killed on the Israeli side in March.

Zinni's trip marked his third attempt to arrange a cease-fire or at least dampen down the hostilities. The Bush administration told Israel and the Palestinians on Wednesday that Zinni would keep working for a truce and peace steps only so long as he is making progress.

"He's got a lot of work to do, but if I didn't think he could make progress I wouldn't ask him to go," Bush told a news conference.

Secretary of State Colin Powell called Palestinian leader Yasser Arafat late Wednesday. Arafat aide Nabil Abu Rdeneh said they discussed Zinni's mission and Israel's occupation of Ramallah and other places in the West Bank and Gaza.

Many Israelis favor the tough military action against the Palestinians launched by Prime Minister Ariel Sharon, including the current mission. But in a stormy Cabinet session Wednesday, Sharon and Defense Minister Binyamin Ben-Eliezer exchanged heated words about how to conduct operations, Israeli media reported.

Sharon said the Cabinet had agreed that Israel should maintain continuous military pressure on the Palestinians for now and accused Ben-Eliezer of halting a number of military operations in Ramallah, the reports said, adding that Ben-Eliezer threatened to resign at one point.

Dozens of Israeli tanks drove into Ramallah early Tuesday and enforced a curfew Wednesday in the largely deserted streets. In several locations, including downtown Manara Square, there were fierce gunbattles.

In one exchange, Fuad Obeidy, the deputy commander of the Palestinian security service Force 17, was killed by Israeli tank fire, doctors said. A 21-year-old Israeli soldier was also killed.

Italian free-lance photographer Raffaele Ciriello, 42, was killed near Manara Square — the first foreign journalist killed in the year and a half of violence. Fellow journalist Amedeo Ricucci said he and Ciriello were following Palestinian gunmen when an Israeli tank appeared from around the corner and fired a machine gun from about 150 yards without warning, striking Ciriello in the stomach.

Army spokesman Lt. Col. Olivier Rafowicz expressed regret at the death but declined to discuss the circumstances without more information. "There has been crossfire for several days and we don't know where he has been killed," he said.

A French photographer working in Ramallah was injured by shrapnel from an explosive device that went off near a group of journalists, witnesses said. In recent fighting, Palestinian gunmen have often placed homemade bombs near Israeli tanks.

About 20 armed Israeli troops searched the seven-story building that houses The Associated Press office in Ramallah, entering the AP office for several minutes. Soldiers then took positions on another floor upstairs, taking some Palestinian fire. Seven members of the AP staff later left the building safely, and soldiers remained; the army promised they would leave the building.

Israeli tanks also surrounded Ramallah Hospital, keeping ambulances away, said Dr. Moussa Abu Hmeid, the head of emergency departments in West Bank Hospitals. He also said Israeli troops cut off water and electricity to the hospital.

Israel's military denied it was preventing people from reaching the hospital and said soldiers inadvertently interrupted the water and electricity supply and were cooperating with Palestinians to repair the damage.

Late Tuesday, the U.N. Security Council approved a U.S.-sponsored resolution that for the first time affirms "a vision of a region where two states, Israel and Palestine, live side-by-side within secure and recognized borders."

Sharon has said a Palestinian state is likely to emerge eventually but will have to be negotiated over a long period.

Bush said Wednesday that Israel's right to exist must also be part of any Middle East peace accord.