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Palestinian Prime Minister Ahmed Qureia (search) on Wednesday rejected statements made by President Bush implying that Israel would be allowed to keep some West Bank settlements in a peace agreement.

After meeting Israeli Prime Minister Ariel Sharon (search) in Washington, Bush said a peace agreement must take into account realities that have developed in the decades since Israel captured the West Bank. Bush said that the existence of Israeli population centers — referring to settlements — must be taken into account.

Palestinians demand a state in all of the West Bank (search) and Gaza Strip (search), with the removal of all Israeli settlements.

Minutes after Bush spoke, Qureia harshly criticized his stand.

"He is the first president who has legitimized the settlements in the Palestinian territories when he said that there will be no return to the borders of 1967," he said. "We as Palestinians reject that, we cannot accept that, we reject it and we refuse it."

Palestinian Cabinet minister Saeb Erekat also dismissed Bush's statement. "This is like someone giving a part of Texas' land to China," he told The Associated Press. He said that over the years, U.S. administrations have assured the Palestinians that issues like borders and settlements would be handled in negotiations between the two sides.

Erekat said, "If Israel wants to make peace, it must talk to the Palestinian leadership."

Sharon said he explained to Bush his plan to withdraw unilaterally from all of the Gaza Strip, along with a much smaller pullback in the West Bank, as steps to reduce friction with the Palestinians. On Monday, before leaving for Washington, Sharon listed five main settlement blocs Israel intends to keep in a final peace deal.

Qureia said the Palestinians cannot be left out of the process. "These issues can be determined only through negotiations and cannot be determined through promises from the leader of this or that country," he said. "This can be decided only by the Palestinian leadership."

Bush endorsed Sharon's plan to pull out of Gaza and parts of the West Bank as "historic and courageous actions." An elated Sharon said his plan would create "a new and better reality for the state of Israel."

In what appeared to be a major shift in U.S. policy, Bush said it is now "unrealistic" to expect that Israel, in any final peace deal with the Palestinians, would make "a full and complete return to the armistice lines of 1949." That is significant because Israel seized the West Bank, Gaza and East Jerusalem in the 1967 war.

Sharon said he explained to Bush his plan to withdraw unilaterally from all of the Gaza Strip, along with a much smaller pullback in the West Bank, as steps to reduce friction with the Palestinians. On Monday, before leaving for Washington, Sharon listed five main settlement blocs Israel intends to keep in a final peace deal.

Earlier, Palestinian leader Yasser Arafat said the peace process would be dead if the United States assures Israel it can keep some key West Bank settlement blocs and would not have to absorb Palestinian refugees.

Palestinian leaders held an emergency meeting Wednesday to discuss Sharon's meeting with Bush. A statement from Arafat's office on his and the Palestinian leadership's behalf said U.S. assurances on the West Bank settlement blocks and the refugees would ruin future negotiations between Israel and the Palestinians.

"The Palestinian leadership warns of the dangers of reaching such an accord, because it means clearly the complete end of the peace process," the statement said.

The assurances would also lead to a "cycle of violence and end all the signed agreements" between the Palestinians and Israel, the statement said.

Palestinians see the settlements as an illegal encroachment on land they want for a future state and support refugees' demands to return to the land they fled during the 1948-49 war.

Qureia had said any Israeli withdrawal must follow the "road map," a U.S.-backed peace plan calling for an independent Palestinian state that has been stalled in recent months.

"We hope the U.S. administration ... will remain committed to its responsibilities ... and not say anything that is considered a reward for a party or a side at the expense of the other party," he said. "Otherwise, there will be no peace."

Sharon has proposed uprooting all 21 Jewish settlements in Gaza and four settlements in the West Bank — with a combined population of about 8,500 — as part of his plan to separate Israelis and Palestinians in the absence of peace moves. In return, Sharon hopes to expand five large blocs of Israeli settlements in the West Bank with a current population of about 125,000.

Sharon must get approval for the plan from his own Likud party, which has long supported the construction of settlements. A party vote is set for May 2, and Sharon has said he would abide by the results of the poll.

Several leading Likud figures oppose the withdrawal plan and have begun campaigning against it. Defense Minister Shaul Mofaz was spearheading the campaign for the proposal, his office said Wednesday.

The party said Wednesday it was organizing two debates in coming weeks between Sharon and Cabinet minister Uzi Landau, who opposes the plan.

Also Wednesday, two Palestinians were lightly wounded as villagers clashed with troops in the West Bank village of Biddou during a protest over a separation barrier Israel is building that runs through local orchards.

Youths threw rocks at troops who responded by firing rubber coated bullets and tear gas.

Israel says the barrier is needed to keep Palestinian militants out of Israel. Palestinians view the barrier as an Israeli land grab.

In Gaza City, some 3,000 Palestinians including 400 gunmen attended a rally calling for the release of jailed uprising leader Marwan Barghouti and the other Palestinians.

One Palestinian, identified as Ali Amar, 22, was killed when he was shot in the head by gunmen firing in the air, hospital officials said.

Barghouti, the highest ranking Palestinian captured by Israel, has been charged with being involved in attacks that killed 26 Israelis. The rally came in the run-up to the day Palestinians express their solidarity with their prisoners in Israeli jails.

Also Wednesday, about 3,000 Palestinian laborers refused to cross into the Erez industrial zone along the boundary between Gaza and Israel for the second day.

Workers say they were protesting what they called humiliating security checks, especially body searches.

Israeli troops also blew up a house in the West Bank city of Nablus on Wednesday that belonged to the family of Sabih Abu Saud, a suicide bomber who blew himself up in a West Bank village last November as the army hunted him down.

Israel routinely demolishes the houses of homicide bombers' families.