Egyptian President Hosni Mubarak will not attend this week's Arab summit, his government announced Tuesday, leaving the gathering without a key moderate voice as it deals with a Saudi overture of peace with Israel.

The cancellation came as Egypt advised Yasser Arafat to stay away as well, angered by conditions Israel has imposed on allowing the Palestinian leader to attend.

Ten heads of state from the 22-member Arab League are not attending the two-day summit, but Mubarak's cancelation is the most significant. It could undermine chances for a strong voice on the Saudi proposals, which had been praised by the United States and which the Arab leaders had been expected to adopt.

Egypt's foreign minister said Mubarak could not attend because of unspecified "domestic commitments."

The Saudi proposal, as floated by Crown Prince Abdullah last month, would offer Israel full normalization of relations with the Arab world in return for a withdrawal from Arab lands occupied in 1967. A proposal of normalization would be the strongest offer made by the Arabs since the peace process began.

But in the past weeks, more hardline Arab states have sought to change to offer to full peace — seen as a lower level than normalization, which would entail more cultural and trade exchanges.

As they left debate of the Saudi initiative for their leaders, who open the summit Wednesday, the Arab foreign ministers drew up a more hard-line draft final statement. It demanded complete Israel withdrawal from occupied Arab lands but said little about what sort of peace Israel would receive in return.

Any decision on the Saudi initiative could be worked into the draft, which also dealt with Iraq and other issues, or passed alongside it at the end of the summit.

Meanwhile, summit preparations have been overshadowed by the question of whether Israel will allow Arafat to leave the West Bank town of Ramallah for the first time in months and travel to Beirut.

Despite U.S. pressure to allow Arafat to attend, Prime Minister Ariel Sharon set conditions Tuesday night that made the Palestinian leader's trip extremely unlikely. Sharon insisted he reserved the right to prevent Arafat from returning home if there are terrorist attacks while the Palestinian leader is gone. Israel has also been demanding Arafat agree to a U.S. brokered cease-fire as a condition for leaving.

Egypt said it was better for Arafat to stay home.

"The Israelis have been playing games with this matter of whether Arafat will attend," Foreign Minister Ahmed Maher said. "They were trying to impose conditions, unacceptable conditions, and the honorable way is for Arafat to say that he is not coming, because it does not depend on the decisions of Israel."

In an interview earlier with the Lebanese daily An-Nahar, Mubarak warned that if Arafat went to Beirut, Sharon will stir up violence and "destroy the last offices of the Palestinian Authority and force it to remain outside."

Egypt, the most populous Arab state and the first to sign a peace accord with Israel, will be represented at the Beirut summit by Prime Minister Atef Obeid, state television said.

The heads of state of Libya, Iraq, Saudi Arabia, Qatar, Kuwait, the United Arab Emirates, Oman, Sudan and Mauritania will also not attend the summit. Libyan leader Moammar Gadhafi rejects peace moves with Israel, while President Saddam Hussein has not left Iraq in more than a decade.

Saudi Arabia will be represented by Abdullah since King Fahd, like a number of aging Gulf monarchs, has health problems.

The draft final statement drawn up by the Arab foreign ministers demanded a "complete withdrawal" by Israel from lands held by Israel since 1967 and it ruled out any new relations with Israel "in light of the relapse of the peace process," according to Lebanon's National News Agency.

The leaders would also step up financial support to Arafat's Palestinian Authority, promising $55 million a month for at least the next 6 months -- possibly more if Israeli-Palestinian violence continued. Leaders also would contribute $150 million total to two other funds for the support of Palestinians.

Underlining the animosities, Al-Jazeera television — the Arab world's best-known broadcaster — canceled plans to air a live interview with Sharon. Arab journalists covering the summit had objected to the interview, with more than 100 staging a protest outside Al Jazeera's studio at the press center.

An Al-Jazeera announcer said the interview was canceled because of "technical conditions" imposed on its crew by Israeli authorities.

In Yemen, several hundred thousand people protested Tuesday in the capital, San`a, against any normalization of relations with Israel. In Egypt, thousands of students at four university campuses staged angry protests, calling on Arab leaders to use force — not peace plans — to back the Palestinian uprising.

Mubarak, in the An-Nahar interview, outlined the five points of the Saudi plan. The first three, he said, deal with an Israeli withdrawal from occupied Arab land, Palestinian statehood and resolving the issue of Palestinian refugees. The other two address peace as a necessary strategy for Arabs and Israel. Details were not provided.

In the contention over the level of peace to offer Israel, Mubarak said there was "no difference between normalization and peace."