Secretary of State Colin Powell (search) called on Israel on Monday to pull back from cities and towns on the West Bank and relinquish control of them to the Palestinian Authority.

In a round of television interviews after Israel pulled troops out of northern Gaza and agreed to withdraw from the West Bank town of Bethlehem, Powell expressed optimism for Mideast peace prospects and boosted Palestinian Prime Minister Mahmoud Abbas (search) as a worthy leader.

"We hope that with these actions, the Palestinian people will realize that Prime Minister Abbas is producing for them and thereby they will empower him even further," Powell said.

A U.S.-backed peacemaking road map requires the Palestinian Authority to dismantle the terror groups that agreed last weekend to stop attacking Israelis for periods ranging from three to six months.

"We ultimately have to reach a point where the capability for terrorism that exists in these organizations is removed," Powell said.

Powell said for Israel to keep backpedaling from land on which the Palestinians intend to build a state there must be no terror and violence from the areas turned over to the Palestinian Authority (search).

"You can't have people with guns, armed militia, inside of a state," he said. "So if we are going to have a Palestinian state all the weapons, all the force within that state, has to be under the government and these terrorist organizations have to be dismantled."

Powell said the Palestinian Authority had committed itself to make sure no more terror comes from areas it is taking over. He said he hoped Israel would now pull out of Bethlehem "and as confidence and trust are developed, hopefully the other cities and towns in the West Bank."

An unarmed U.S. monitoring group, headed by Assistant Secretary of State John S. Wolf, is working with the two sides on security arrangements. But most of the progress is a result of direct discussions between the two sides, State Department spokesman Richard Boucher said.

Asked on ABC's "Good Morning America," if recent developments were encouraging, Powell replied, "I think we should be optimistic. We've seen positive developments over the weekend with the security agreement between Israel and (the) Palestinian Authority to turn over responsibility for the Gaza Strip from Israel to the Palestinian Authority."

"They worked very hard on this turnover over the last week or so. I'm glad it came to a successful conclusion and it didn't take them long to executive," he said.

Meanwhile, on the campaign trail with President Bush, who is soliciting contributions and political support for a race for a second term, White House spokesman Ari Fleischer said the president was very optimistic that "we may, as a world community, be able to watch the birth of a new nation."

"The president is hopeful but he's realistic," Fleischer said. "The Middle East is an area where on a good day they take two steps forward, one step backward."

Bush sent Condoleezza Rice, his national security adviser, to Israel and the West Bank last weekend for talks with Abbas and Israeli Prime Minister Ariel Sharon.

She renewed an invitation to Abbas for a meeting with the President, and reports surfaced that the Palestinian leader and Israeli Prime Minister Ariel Sharon would meet with Bush again.

But Palestinian and Israeli sources said no date for visits had been considered.