Palestinian leader Yasser Arafat (search) indicated he accepts Israel as a Jewish state and that Jews have a religious link to Jerusalem, according to the summary of an interview made available Thursday.

In the past, Palestinian officials have rejected the Jewish claim to a hotly disputed holy site in the Old City of Jerusalem (search) by claiming that the biblical Jewish Temples never existed, and have not acknowledged that Israel should be a Jewish state.

American Jewish activist Henry Siegman talked with Arafat recently, and the veteran Palestinian leader addressed the concerns, according to the summary released by Siegman's group, the New York-based Council on Foreign Relations (search).

Arafat said that the Palestinians claim east Jerusalem as the capital of a state they want to create and insist on sovereignty over the disputed site, where the Al Aqsa Mosque compound is now located.

However, he said, Israel would receive sovereignty over the Western Wall (search) -- a remnant of the Second Temple compound -- and the Jewish Quarter of the Old City, "because we recognize and respect the Jewish religion and the Jewish historical attachment to Palestine," according to the transcript.

Asked about Israel as a Jewish state, Arafat said that it was up to Israel to define itself, as long as it was democratic and guaranteed the rights of minorities.

Dore Gold, an adviser to Israeli Prime Minister Ariel Sharon, said Arafat's comments were far from an endorsement of Israel as a Jewish state. He said Arafat has never given up the right of return of Palestinian refugees and their descendants -- about 4 million people -- to their homes in Israel.

"He wants to flood Israel with Palestinians and create an Arab majority," Gold said.

In the interview, Arafat indicated flexibility on the refugee issue, saying it should be solved on the basis of an Arab League resolution that calls for agreement among the parties.

Gold rejected the statement, saying that Arafat is "completely unreliable as a negotiator. He has never carried out an agreement."

Israel's government declared Arafat "irrelevant" several months ago and has been trying to bypass him, but Palestinians insist that he is their elected leader.