Dozens of Israeli soldiers sealed off the Old City of Nablus (search) with barbed wire and cement blocks Thursday, while troops searched house by house for militants in one of the biggest operations in the area in months. Two Palestinians were wounded in clashes, hospital sources said.

Troops in Jeeps and bulldozers raided the city late Wednesday, exchanging fire with Palestinians and imposing a strict curfew on Nablus' Casbah.

During searches, troops found a belt with 44 pounds of explosives, which they blew up in a controlled explosion, damaging the house where it was found, the army said. Troops also found a roadside bomb at a junction and detonated it, the army said.

Nablus Mayor Mahmoud Aloul said the troops were shooting and blowing up doors in the Old City's alleys and rounding up residents for questioning.

"Apparently it is a long operation," he said.

Israel has long called Nablus a "hornet's nest." Many Palestinian suicide bombers have originated in the city, and fighting has been especially fierce during more than three years of violence.

The army said a handful of suspects had been detained in Thursday's raid, but Palestinians said no major fugitives had been captured.

During the raid, soldiers shot tear gas and bullets at a group of Palestinians, wounding two, hospital officials said. Palestinians said the men were shot after they threw stones at soldiers. The army said troops shot at a group of armed men after one of them threw a firebomb and the others opened fire at soldiers.

No Israelis were injured.

In Gaza, Israeli soldiers shot and killed two Palestinians wearing bulletproof vests and armed with rifles and grenades who approached an outpost near the Jewish settlement of Dugit, the army said.

Islamic Jihad (search) and the Al Aqsa Martyrs' Brigades (search), a violent offshoot of Yasser Arafat's Fatah (search) movement, took joint responsibility for the attempted attack.

Separately, Israeli troops shot a Palestinian seen digging in the sand near the Jewish settlement of Bedolah in Gaza. It was unclear whether the Palestinian was killed, the army said.

Violence in the coastal strip has increased in recent months as Israel and the Palestinians jockey to make a planned Israeli pullout look like a victory.

Egypt is pushing to train and reform Palestinian security forces to ensure a smooth handover if Israeli Prime Minister Ariel Sharon (search) implements his plan to evacuate all Gaza Strip (search) and four West Bank settlements by September 2005.

Sharon refuses to negotiate with the Palestinians and has asked Egypt — which borders Gaza and fears chaos on its doorstep after a withdrawal — to help guarantee security.

In a visit to Israel and the West Bank on Wednesday, Egyptian intelligence chief Omar Suleiman outlined a timeline for Palestinian reforms, including a truce between Palestinian factions by September, followed by a weapons roundup and the dismantling of militant groups.

Palestinian Prime Minister Ahmed Qureia (search) welcomed Egypt's plan, saying 30 Palestinian officers would be trained in Egypt in the next two months. After a truce is reached, some 200 Egyptian advisers will begin training forces in Gaza.

By September, the Palestinians also will have to present a detailed plan on reforming the security services, officials said.

Israeli officials were wary about whether Arafat — who has repeatedly balked at reforming his security forces, relinquishing power and rounding up militants — would follow through.

"There is skepticism," Ron Prosor, deputy director-general of Israel's Foreign Ministry, said, but he welcomed what he called a real Egyptian attempt to "pressure Arafat."

Although Palestinian militant groups announced their opposition to an Egyptian role in Gaza earlier in the week, Moussa Abu Marzouk (search), a Hamas leader based in Syria, said Egyptian troops would be safe in the coastal area.

"The battle between the Palestinians and the Israeli occupation forces should not be turned into a battle between the Palestinians and any Arab party," he said.

While Egypt works to ensure order in Gaza, Israel faces the complex task of figuring out how to remove the 7,500 mostly hard-line settlers from Gaza.

A group of influential rabbis ruled Wednesday that Israeli soldiers and police who evacuate settlers are violating Jewish law, Daniel Shiloh, a rabbinical leader in the Settlers' Council, told Israel's Army Radio.

Meanwhile, in Washington, the House overwhelmingly approved a bill Wednesday backing President Bush's support for the Gaza pullout and his suggestion that under a final peace deal Israel can keep large West Bank settlements and refuse to allow Palestinian refugees to resettle in Israel. The Senate was expected to approve the legislation Thursday.

Palestinians want to establish an independent state in all the West Bank and Gaza — lands Israel captured in the 1967 Mideast war — and demand the removal of all settlements.