Palestinian security forces set up checkpoints in the Gaza Strip Wednesday to show they can maintain order as part of a new security agreement, but Israel postponed a meeting to implement the pact because of fresh violence. Two Palestinians were killed in separate clashes.

The agreement to use Gaza and the West Bank town of Bethlehem as test cases, announced Aug. 18, led to withdrawal of Israeli forces from Bethlehem two days later. Palestinians charge the Israelis are stalling the Gaza handover.

Israel counters that the Palestinians are not stopping terror attacks and called off a meeting between Israeli Defense Minister Binyamin Ben-Eliezer and Palestinian Interior Minister Abdel Razak Yehiyeh after overnight incidents in Gaza.

In a statement, the Israeli Defense Ministry said the meeting had been postponed indefinitely, but added that Ben-Eliezer was still committed to implementing the accord.

Armed with automatic weapons, Palestinian police in Gaza checked papers and opened car trunks -- sometimes at the remains of roadblocks destroyed by Israel months ago -- in an attempt to fulfill their end of the deal.

The presence of Israeli checkpoints just yards from Palestinian ones in Gaza added to Palestinian skepticism about whether the deal can stick.

"I hope it will work, but we cannot trust the Israelis," said Ahmed Abu Oweila, a 42-year-old Gaza resident. "Nothing has changed from their end."

Israeli Cabinet minister Dan Naveh also expressed skepticism about the plan.

"Even if we have some illusion that there has been a certain improvement in the conduct of the Palestinians in the past few days, it must be remembered that this is not due to Palestinian action. It is a result of the recent determined activity of the (Israeli) army," he said.

After back-to-back homicide bomb attacks in Jerusalem in mid-June, Israel sent its forces into seven of the eight main Palestinian towns in the West Bank, taking control and imposing curfews, and arresting Palestinian terror suspects every night since. The withdrawal from Bethlehem was the first since the Israeli crackdown.

Israeli Foreign Minister Shimon Peres said the army would withdraw from other areas if Palestinians maintained order in Bethlehem and Gaza.

"Movement to normal relations is a direct function of the security conditions and we hope very much the Palestinians will take seriously their responsibility in Gaza and Bethlehem," Peres said during a visit to the Karni Crossing between Gaza and Israel.

Also Wednesday, Israeli forces arrested Jamal Natche, the head of the military and political wings of the militant group Hamas in the West Bank city of Hebron, according to security officials who spoke on condition of anonymity.

Israeli tanks moved up the seashore early Wednesday, firing machine guns and cannons at floating tubes carrying a suspected weapons shipment as helicopters hovered overhead. One container blew up when it was hit by army fire, the military said.

Late Tuesday, Palestinians fired a mortar shell at a home in a Jewish settlement in Gaza and hit the top floor, the military said. The family in the house was unhurt.

In clashes Wednesday, two Palestinians were killed.

In the Jenin refugee camp in the West Bank, Mohammed Amouri, 34, was killed by Israeli tank fire while he was inside his home, witnesses said. Gunmen fired on four Israeli tanks patrolling the camp and Amouri was hit in the head by Israeli return fire, the witnesses said.

A Palestinian vegetable vendor was shot dead by Israeli troops near the Gush Katif Jewish settlement bloc in Gaza. Palestinian witnesses said he was riding his bicycle. The army said he threw stones and tried to climb a post off limits to Palestinians.

After nightfall, three Israeli tanks moved about 300 yards into Palestinian territory and closed the Gaza coastal road, residents said.

Dozens of Palestinian children and teenagers threw stones, plastic chairs and garbage at two Israeli tanks patrolling Jenin on Wednesday.

The children climbed atop one of the tanks and started throwing some equipment on the ground, witness said. One of the children was slightly injured when he fell off the tank, which fired its heavy machine gun, the witnesses said.