Fire blazed in the Church of the Nativity compound for half an hour early Thursday during a fierce exchange of gunfire between Palestinians and the Israeli forces besieging it.

Flames leaped out of three rooms in the Orthodox Christian and Franciscan section of the large compound. Palestinians said by telephone from inside the church that three people were slightly burned trying to put out the blaze.

The nighttime fire was about 50 feet from the 4th-century basilica itself, built over the traditional birthplace of Jesus. It was not known if any of the nearly 200 people who are in the building were staying where the fire erupted.

After about 30 minutes, the flames were extinguished and an uneasy calm returned to the area. There was no apparent damage to the church, but the damage to the compound wasn't immediately clear.

The fire broke out during an exchange of fire between Palestinian gunmen in the church and Israeli soldiers encircling it. During the shooting, Israeli soldiers threw smoke bombs and fired flares into the air.

There were sharply different accounts of how the fire started. Palestinians in the church said the Israeli flares set the fire. Israeli government spokesman Dore Gold accused fighters inside the church of starting it. "The fire that broke out had nothing to do with an Israeli operation," he said on CNN.

At his Ramallah compound, Arafat appeared to be shaking with anger as he faced cameras after receiving word of the fire and blamed the Israelis.

"How could the world possibly be silent about this atrocious crime?" he said to journalists and Palestinian supporters who rushed into his offices after the Israelis pulled out of his compound.

"I don't care if this room I'm sitting in blows up. What concerns me is what is happening at the Church of the Nativity. This is a crime that cannot be forgiven."

Israeli forces have been surrounding the church since April 2, when more than 200 Palestinians, including gunmen, took refuge inside as Israeli troops invaded.

There was no immediate word of further casualties. Dozens of people have left the church in the last several days, according to agreements between Israeli and Palestinian negotiators. However, there is still a standoff on the main issue, the fate of the gunmen. Israel insists they must either surrender or accept exile, while the Palestinians are prepared only to take them to the Gaza Strip.

The church remains the last point of contention from Israel's large-scale incursion into the West Bank that began March 29, after a series of deadly Palestinian suicide bomb attacks.

On Wednesday, Israel withdrew its forces from Palestinian leader Yasser Arafat's office building in the West Bank town of Ramallah after a U.S.-brokered deal, under which six Palestinians wanted by Israel were taken from the building to a Palestinian prison in Jericho.

Earlier on Wednesday, two Palestinian policemen emerged from the church, a day after 26 civilians and members of the security forces walked out of the besieged compound.

On Tuesday, 26 Palestinians emerged from the church and were driven away in an Israeli bus. Several hours later, 25 were released, and one was taken to an Israeli hospital for treatment.

One of the group, Khaled Girashi, 21, a civilian, said he lost 33 pounds during the standoff, with food supplies having run low. He said he was beaten by Israeli troops during a night of questioning.

Palestinians holed up in the church give different reasons for remaining. The Palestinian policemen and civilians say they want to show solidarity for the Palestinian cause, although Girashi said many now wanted to leave. Some Palestinians say they are afraid for their lives, with Israeli troops encircling the shrine.

Over the past 1,600 years, rulers have threatened to destroy the Church of the Nativity which was dedicated in 339, but it has rarely been scarred in conflict.

During the Arab Muslim conquest, many churches — including Jerusalem's Church of the Holy Sepulcher — were heavily damaged or destroyed, but the Church of the Nativity survived.

The latest flareup has Israeli officials and Christian leaders meeting to try to end the crisis without further bloodshed.

"The church is in danger because both sides are armed," said Archbishop Aristarghos, chief secretary of the Greek Orthodox Patriarchate. He said Christian leaders and the Israeli government agreed "every effort should be made to reduce the tension."