Palestinian frustration at nearly two years of poverty during an uprising against Israel boiled over in Gaza, where protesters broke into Yasser Arafat's compound.

Despite the growing frustration of Arafat's people, a Palestinian Cabinet minister warned that a new U.S. policy of bypassing Arafat in negotiations poses dangerous complications.

About 4,000 demonstrators crashed through iron gates into Arafat's seaside Gaza City compound Monday, carrying banners and signs, some with pita bread attached as a symbol of hardships in earning enough to buy their daily bread.

The demonstrators chanted, "We want jobs! We want food!" in a rare, large demonstration against Arafat. Most Palestinians blame the Israelis for their troubles, pointing to roadblocks and travel restrictions that has devastated their economy during 21 months of violence.

The Israelis say the restrictions, including a ban on Palestinians working in Israel, are necessary measures to prevent attacks like suicide bombings. Work in Israel provided much of the income for Gaza Palestinians before the current violence erupted in September, 2000 and the gates were shut.

Arafat has not been in Gaza since late last year. Much of the time, as now, he has been confined to his West Bank headquarters in the town of Ramallah, surrounded by Israeli tanks.

Though Arafat still has widespread support, the demonstration signals growing doubts among Palestinians that the campaign of bombings and shootings can help them achieve their goals, while bringing on ever-harsher Israeli retaliation.

Israeli forces are in control of seven of the eight main Palestinian cities and towns, confining residents to their homes most of the time. The Israelis moved in after back-to-back suicide bombings in Jerusalem on June 18 and 19 killed 26 Israelis.

On Monday, the military lifted the curfews for a few hours everywhere except Nablus, the largest city. The city was extra tense on Monday, a day after Israeli forces killed the top Hamas bomb-maker there, Mohaned Tahir, 26. Israel charged that he was behind bombings that killed more than 100 Israelis, including a Jerusalem bus bombing on June 18 that killed 19 and set off the latest Israeli incursion into the West Bank.

The Islamic extremist Hamas has claimed responsibility for many of the 71 suicide bomb attacks that have killed 251 Israelis. Last week Israeli Prime Minister Ariel Sharon declared a "massive campaign" against Hamas. However, in recent weeks, Hamas has been overtaken by secular groups affiliated with Arafat's Fatah movement in sending bombers into Israel.

Israel blames Arafat for all the attacks, charging that he has done nothing to stop the extremist groups and has given at least tacit approval to attacks by militias close to him. The Palestinians counter that Israeli occupation and harsh restrictions imposed by the Israeli military have led to Palestinian frustration and desperation, fertile ground for extremist groups recruiting bombers.

Responding to a statement from Secretary of State Colin Powell that the United States would not deal with Arafat, Palestinian Cabinet Minister Saeb Erekat said that would complicate talks, because Arafat is the chief Palestinian negotiator.

The American position "makes things more complicated and it will not lead to any solution. It's an unwise attitude," Erekat said.

President Bush has said the Palestinians must change their leadership, bringing in people who are "not compromised by terror." On Sunday, Powell said the Palestinian leadership was flawed and ruled out any immediate meetings with Arafat.

In Gaza, Israeli forces blew up a tunnel used for smuggling weapons for the Palestinians under the border with Egypt to the town of Rafah, the military said late Monday.