Acting on a tip, Israeli troops ambushed Palestinian militants holed up in an underground tunnel Saturday, killing seven fugitives including the most-wanted man in the West Bank (search).

Army commanders said the killing of the fugitives was the main goal of a three-day operation to root out militants in the West Bank city of Nablus (search). Troops began withdrawing from the center of the city soon after the raid.

Soldiers also killed an eighth militant during an earlier raid in Nablus, the largest West Bank city.

Also Saturday, Israeli border police clashed with hundreds of Palestinians protesting Israel's West Bank separation barrier, beating demonstrators and firing rubber bullets and water cannons to disperse the crowd.

The violence occurred in the Jerusalem suburb of A-Ram, an affluent area inhabited by Palestinians who left the city to escape overcrowding.

Dozens of people suffered from tear gas inhalation, and a news photographer was slightly wounded by police. A police spokesman said rioters threw stones, hammers and an ax.

Meanwhile, Palestinian leader Yasser Arafat (search) called for a cease-fire with Israel during the Olympic games in Greece, scheduled for Aug. 13-29. He made the offer at a lighting ceremony for an unofficial Olympic torch.

"I declare our respect and commitment for an Olympic truce," Arafat said.

Israeli officials, who accuse Arafat of supporting militants, dismissed the offer as insincere.

Elsewhere, U.S. Mideast envoy William Burns met with Palestinian officials, seeking to build momentum for Israel's planned withdrawal from the Gaza Strip.

"I stressed President Bush's determination to do everything that the United States can to help seize the opportunity presented by the Israeli initiative," Burns said after meeting Palestinian Prime Minister Ahmed Qureia.

Burns praised Egypt's efforts to help the withdrawal succeed. He also stressed that the Gaza pullback should be a step in the internationally backed "road map" peace plan, which envisions a Palestinian state in Gaza and the West Bank.

Israeli Prime Minister Ariel Sharon (search) refuses to negotiate with the Palestinians. Egypt, which borders Gaza, has served as a mediator and offered to train Palestinian forces ahead of the pullout, scheduled by September 2005.

Israeli military officials called the raid in Nablus a great success. An army commander, who identified himself only as Lt. Col. Itzik, said the men killed in the ambush were the main targets of the operation.

"We entered the city just to strike at these people, and no one else," Itzik said. "We have now completed the operation and we have left the old city in light of this success."

Palestinian witnesses confirmed that troops began withdrawing from the city center, the casbah, but remained on the outskirts of the neighborhood. Some 20,000 residents of the casbah remained indoors after a three-day curfew, unsure if they could go outside.

The tracking of the militants began earlier in the day, when troops shot toward two armed men, killing one, Itzik said. The second man fled, and later entered a hole under a closet in a house that led to a tunnel where seven other militants were hiding, Itzik said.

When troops threw grenades into the opening of the tunnel, dug two floors underground, the suspect exited from a different opening, suffering from smoke inhalation, Itzik said. Troops shot and threw more grenades into the hiding place, killing the wanted militants inside.

Among the dead was Nayef Abu Sharkh (search), a leader in the Al Aqsa Martyrs' Brigades (search). Palestinian and Israeli security sources said Abu Sharkh was Israel's most-wanted militant in the West Bank.

Military officials said Abu Sharkh was responsible for a January 2003 double suicide bombing that killed 23 people in Tel Aviv and another in November 2002 that killed two people.

Palestinian hospital officials said Sheik Ibrahim, Islamic Jihad's top commander in the West Bank, was also killed. Ibrahim and Abu Sharkh were listed on a leaflet Israel handed out earlier this week asking residents to turn them in.

Four other militants were identified as members of the Al Aqsa, Islamic Jihad and Hamas militant groups; the fifth had not yet been identified.

Palestinian Cabinet minister Saeb Erekat condemned the bloodshed in Nablus and called for intervention by the so-called Quartet of Mideast mediators — the United States, the United Nations, European Union and Russia.

"In a time we see Egyptian efforts and William Burns' visit, we see the Israeli escalation as an attempt to undermine their efforts," Erekat said.

Meanwhile, Israeli police said nine people were arrested at the protest in A-Ram, which lies just yards outside Jerusalem city limits. Participants said about 100 foreign and Israeli activists were among the demonstrators.

The construction planned there is one of the most sensitive sections of the separation barrier that Israel is building in the West Bank.

Unlike fellow Palestinians with West Bank identity cards, most A-Ram residents have Jerusalem cards that allow them freedom of movement in the city and throughout Israel.

But the barrier will soon isolate A-Ram's 64,000 residents from their lifeline — Jerusalem. About 25,000 residents work in the city, and thousands of children attend school there.

TV footage showed riot police pushing protesters to the ground during Saturday's confrontation. Witnesses said masked undercover police also moved into the area, beating protesters.

A Palestinian photographer for the French news agency Agence France-Presse was beaten in the head and kicked by police, witnesses said. He was lightly wounded, hospital officials said.

Israeli police said the forces had responded to violent rioting. They declined to comment on the reported beating, saying a complaint must be filed.