Israeli soldiers retook this divided city Saturday, imposed a curfew and herded dozens of blindfolded Palestinians into buses. It was a first response to a Palestinian ambush that killed 12 members of the security forces lured into a dead-end alley.

Israel's retaliation was expected to focus on Hebron itself, with troops staying to crush militias. An adviser to Prime Minister Ariel Sharon said there was no plan to expel Palestinian leader Yasser Arafat, as several Cabinet members demanded.

Friday night's ambush by the Islamic Jihad group heightened tensions in Hebron, home to 130,000 Palestinians and 450 Jewish settlers. About 1,000 settlers attended a rally after the end of the Sabbath, some chanting "revenge" and "death to the Arabs." Army commanders urged settler leaders to prevent vigilante action.

In the Gaza Strip, hundreds of Islamic Jihad supporters rallied in celebration. Abdullah Shami, a leader of the group, said "there is no room to give up or to surrender to this criminal Nazi enemy who seeks to exterminate Palestinians in collusion with America."

The attack began shortly after 7:30 p.m. Friday, after Jewish worshippers had finished Sabbath prayers at the Tomb of the Patriarchs in downtown Hebron and were walking back to the Jewish settlement of Kiryat Arba, about half a mile away, when shot rang out from an olive grove.

An army jeep began chasing the gunmen, racing into a dead-end alley and coming under massive fire from all directions, said Col. Noam Tibon, an army commander.

Early reports had indicated that settlers were among the casualties, but they were out of harm's way when the shooting at the soldiers began. No worshippers were injured.

The dead included four Israeli soldiers, five border policemen and three civilian security guards from Kiryat Arba. It was one of the highest death tolls among security forces in a single encounter since the outbreak of fighting in Sept. 2000. Three Palestinian gunmen were also killed.

Among the dead was Hebron brigade commander, Col. Dror Weinberg, the highest-ranking Israeli officer shot dead in more than two years of Mideast violence.

Fourteen soldiers and border policemen were wounded, including several who were in serious condition.

The U.S. State Department condemned the attack as a "heinous crime," adding that while Israel has the right to take anti-terrorism measures, it must do everything it can to prevent civilian casualties.

Newly named Defense Minister Shaul Mofaz talked by telephone to U.S. Secretary of State Colin Powell and Defense Secretary Donald Rumsfeld, Mofaz's office said, adding that Mofaz blamed the Palestinian Authority for the attack, though the Islamic Jihad claimed responsibility.

Early Sunday, Israeli helicopters fired three missiles at a target near the Gaza city of Khan Younis, Palestinian security officials said. They said the missiles hit a metal workshop, setting a fire, but no one was hurt. The Israeli military said Palestinians used the metal workshop to make weapons.

Netanyahu said the international community must "support Israel's right and obligation to take vigorous action against terror and the regimes that back it."

Netanyahu said he continued to support the expulsion of Arafat. However, Raanan Gissin, an adviser to Sharon, said that a previous Cabinet decision not to expel the Palestinian leader remained in effect.

The United States opposes the expulsion of Arafat at a time when it tries to maintain Arab support for a possible strike against Iraq. The ambush jeopardized U.S. intentions to cool the Mideast conflict and focus attention on Iraq, and scuttled a plan to turn Hebron into a model of calm after an Israeli army pullback.

Jewish settlers in Hebron demanded that troops remain there indefinitely and that the government cancel a 1997 interim peace deal under which Israel withdrew from most of the city.

"What is needed is a response that will shock the enemy," said a statement by settler leaders.

Israeli troops razed three homes and cut down the olive grove from which shots were fired. They also rounded up 43 Palestinians, herding them blindfolded into army buses. Several wanted men were among the detainees, the military said.

Armored personnel carriers rolled into the Palestinian sector of Hebron, and troops were deployed throughout the city. Hebron's Palestinian residents were put under tight curfew.

Israeli forces also closed a liaison office, army radio reported. In quieter times, the office is used to coordinate Israeli and Palestinian activities.

Israeli soldiers withdrew from the Palestinian sector three weeks ago under what was to have been a partial pullback of forces from West Bank areas where calm was restored.

In other developments Saturday, 17-year-old gunman Ibrahim Saade was killed in a shootout with Israeli troops in the Jenin refugee camp. Saade, whose twin brother was killed in similar circumstances three months ago, is the son of wanted Islamic Jihad leader in Jenin, Sheik Bassam Saade.

Saade told The Associated Press in a telephone interview from his hideout that he is not shedding tears for his boys deaths. "I expected both of them to be killed because I raised them in the way of Islam, the way of Jihad [holy war]. ...I want your congratulations because my son is a martyr."

In Nablus, 20-year-old Samar Sharab was hit by Israeli army fire while looking out the window of her home, said her father, Mahmoud Sharab. The army said she was hit by wall fragments and said it was sorry about the death.

Hebron, to the south of Jerusalem, has long been a volatile place filled with religious and political tensions. Muslims here are among the most devout and the settlers among the most radical.

One of the flashpoints is the Tomb, where the biblical Abraham, Isaac and Jacob are buried. Jewish settler Baruch Goldstein killed 29 Muslim worshippers in February 1994 before being beaten to death there. The massacre sparked riots that lasted for days and helped spawn the phenomenon of homicide bombings against Israelis.