Israeli officials on Tuesday rebuffed Palestinian proposals for a comprehensive cease-fire, saying the military would not halt strikes in the West Bank (search) and Gaza Strip until Palestinian security forces begin dismantling militant groups.

The Palestinian offer came in an interview on Israel Radio by Yasser Arafat (search)'s national security adviser, Jibril Rajoub, who said that if Israel reined in its military, the Palestinian Authority would bring an end to terror attacks and work toward talks on a final peace settlement.

"There must be a mutual cease-fire based on an end to violence on both sides," Rajoub told The Associated Press. He said the proposal would be formally submitted to Israel once prime minister-designate Ahmed Qureia (search) puts together his Cabinet.

Early Wednesday, Israeli troops in the West Bank city of Nablus shot and killed a Palestinian after he opened fire on an army patrol in the city's old market district, the military said.

Palestinian security sources said the dead man was an activist in the Al Aqsa Martyrs Brigades (search), loosely linked to Yasser Arafat's Fatah organization.

The United States, meanwhile, vetoed an Arab-backed U.N. resolution Tuesday that demanded Israel halt threats to expel Arafat from the West Bank. U.S. officials said they opposed the measure because it did not contain a condemnation of terrorist groups such as Hamas.

Eleven of the 15 Security Council nations voted in favor of the resolution, while Britain, Germany and Bulgaria abstained.

Rajoub wouldn't commit to dismantling the militant groups -- a requirement of the U.S.-backed "road map" peace plan -- and Israeli officials made clear that without this the idea was stillborn.

"This is not the type of cease-fire which may entice us to change our policy," Justice Minister Yosef Lapid told the Foreign Press Association in Jerusalem.

"The only way the Palestinians can prove that they really want to have a peaceful solution with Israel is taking up the fight against the Hamas and the (Islamic) Jihad. If they don't do it, we have to do it," said Lapid, who heads Israel's third-largest party.

As if to underscore the point, Israeli troops killed an Islamic militant fugitive in an arrest raid in the West Bank village of Dura on Tuesday, witnesses and the army said. In the past, such raids have triggered revenge bombings by militants.

The road map peace plan envisions a Palestinian state in the West Bank and Gaza by 2005.

The Palestinians say they won't risk civil war by cracking down on the militants and maintain that if Israel met its own road map requirements -- freezing settlement construction in the West Bank and Gaza, withdrawing from Palestinian autonomous zones -- militants could be persuaded to lay down their arms.

But beyond such wrangling lies a fundamental disagreement on how to wind down three years of violence: Israel says those who staged terrorist attacks must be punished and the potential for more attacks eliminated, while Palestinians seek a sort of amnesty.

Arafat struck a conciliatory tone Tuesday but stopped short of making a specific cease-fire offer. "We say to the peace supporters in Israel that we extend our hand to you to revive peace," he said in a speech to about 2,500 Palestinians at his battered West Bank headquarters.

Information Minister Nabil Amr told reporters, "there is a strong Palestinian wish to reach a cease-fire with the Israelis, but the only obstacle is Israel, which is committed to the military road."

A senior Palestinian official, speaking on condition of anonymity, said there are high-level contacts between the Palestinian Authority and the militant group Hamas on a new cease-fire. Palestinian Cabinet minister Yasser Abed Rabbo said the Palestinian leadership asked the militants "not to take any actions which may be used by (Israeli Prime Minister Ariel) Sharon to continue and expand his aggression against our people."

Hamas has been weakened in recent weeks, both by Israel's targeted killings of leaders and fugitives, and by attempts by the United States, the European Union and the Palestinian Authority to stop the flow of funds to the group.

Hamas members would say only that there were Egyptian efforts to mediate a new cease-fire. Mohammed Hindi, Islamic Jihad's leader in Gaza, dismissed the Palestinian truce proposal as "insignificant."

Hamas, Islamic Jihad and militants linked to Arafat's own Fatah movement declared a unilateral -- and temporary -- halt to bombings and shootings in June.

But Israel saw the cease-fire as a ruse to allow militants to regroup and continued arrest raids, several ending in the killings of militants. The truce collapsed last month with a suicide bombing on a Jerusalem bus that killed 23.

Israel then started targeting the highest-ranking Hamas leaders -- founder Sheik Ahmed Yassin narrowly escaped a bombing last week. And after 15 Israelis were killed in two bombings days later, Israel declared it would "remove" Arafat at an unspecified future date.

Israeli officials blame the Palestinian leader for the collapse of peace talks and the outbreak of violence that has killed 2,467 people on the Palestinian side and 858 on the Israeli side over three years. They maintain he is preventing a crackdown on the militants and encouraging terrorism.

The U.S. government has said Arafat should be sidelined but not exiled.

Speaking Tuesday after the Security Council vote, America's U.N. Ambassador John Negroponte reiterated that the United States doesn't support the elimination or forced exile of Arafat and believes that his diplomatic isolation is the best course.

He said the United States was forced to use its veto because the resolution failed to name groups such as Hamas and the Al-Aqsa Martyrs Brigade, which has claimed credit for numerous suicide bombings and other attacks against Israelis.

"The Palestinian Authority must take action to remove the threat of terrorist groups," Negroponte said.

Raanan Gissin, a spokesman for Sharon, said the Palestinians face a choice between sticking with Arafat or establishing a state. "The two won't go together," he said.

But the vaguely worded Israeli decision set off global condemnation and speculation about how Arafat might be removed -- Vice Premier Ehud Olmert even said he could be killed, which other officials backed away from -- as well as warnings by experts that the move could spark more violence and make an exiled Arafat more powerful.