Israeli forces took over this West Bank city early Monday, killing nine Palestinians, just hours after Israel's Cabinet reluctantly agreed to a U.S. proposal to release Palestinian leader Yasser Arafat from his monthlong confinement and allow him to travel freely.

Israel said Arafat was now free to leave his headquarters in the West Bank town of Ramallah. However, Israeli tanks continued to surround Arafat's compound Monday, and Palestinian officials said Israel told them Arafat could only travel once six wanted Palestinians had been moved from his headquarters to a prison in the town of Jericho. The prisoner transfer was expected in a day or two, they said.

Israel gave its consent to ending Arafat's confinement with the understanding that the United States, in turn, would stand by Israel's side in an increasingly tense showdown with the United Nations over a fact-finding mission to the Jenin refugee camp, government officials said.

At another flashpoint, the Church of the Nativity in Bethlehem, a Palestinian militiaman was killed by Israeli sniper fire Monday when he walked into a courtyard, the army said. Three monks later carried the body out of the compound. The church, built over Jesus' traditional birth grotto, has been under Israeli siege for a month, with more than 200 armed Palestinians holed up inside.

In Washington, a U.S. official said an end to the Bethlehem standoff might be imminent, but provided no details. An Israeli diplomat said the emerging deal would give wanted gunmen a choice of exile or prosecution by Israel. However, Palestinian negotiators insisted Tuesday that exile or trial were not an option.

"We are sticking to our stand that there will be no exiling of anyone outside his country," Salah Taameri said. "We have one position, which is that the people wanted by Israel should go to Gaza without being detained or placed under Israeli investigation. And if there are any accusations against them, the Palestinian Authority will investigate them and then make the appropriate decisions."

Israeli forces entered the West Bank city of Hebron at about 4:30 a.m., with tanks and armored personnel carriers driving in from all directions.

Nine Palestinians, including six civilians, were killed by Israeli fire, Palestinian witnesses said. In the bloodiest incident, a missile fired from an Israeli helicopter hit a one-story house, killing a gunman and four civilians. Two more civilians who rushed to the scene to try to help were killed by helicopter fire, witnesses said.

In downtown Hebron, Israeli troops lined up dozens of Palestinian men against a wall, handcuffing and blindfolding them. Several of the men knelt on the pavement, as Israeli troops stood guard. In previous incursions, Israel detained large numbers of people for questioning, and released most after several days.

Israeli Defense Minister Binyamin Ben-Eliezer said troops arrested 17 Palestinians in Hebron, including several high on Israel's wanted list, and found two suitcases filled with explosives, as well as a car bomb ready for detonation.

Ben-Eliezer said troops wouldn't stay long. "We went there to hit that infrastructure (of terror groups) and to get out quickly," he said.

The defense minister said he expected to pull troops out of Ramallah within a few days, once the six wanted men had been moved, and hoped the Bethlehem standoff would be resolved soon. "We are in the last stage of the entire operation," Ben-Eliezer said.

The Hebron incursion came in retaliation for a weekend attack on the nearby Jewish settlement of Adora, in which four Israelis, including a 5-year-old girl, were killed. Hamas claimed responsibility for that attack.