Israel withdrew its soldiers from Bethlehem early Tuesday, part of the first Israeli-Palestinian security agreement in a year that tests the waters for more handovers.

The United States welcomed the deal, which also calls for Israel to withdraw from parts of Gaza and for the Palestinians to take over security duties in the newly vacated areas. The State Department said it could lead to further peacemaking steps.

While tension dropped in some places, violence continued in others. Israeli forces blew up a building they said was a bomb factory in the old city of Nablus, and soldiers shot and killed a 14-year-old boy in a village near Jenin.

In another development, two senior Palestinian officials in the West Bank said that Abu Nidal, head of one of the most extreme and violent Palestinian factions, was found dead in Baghdad of multiple gunshot wounds. A fierce foe of Palestinian leader Yasser Arafat, Abu Nidal, whose real name is Sabri al-Banna, targeted Arafat's aides as well as Jews and Israelis in terror attacks.

The Bethlehem withdrawal began late Monday and residents said the last Israeli troops had departed by early Tuesday morning. Palestinian police began patrolling the town.

"The redeployment is aimed to enable the Palestinians to act against terrorism and restore daily life," an Israeli military statement said, confirming that Israeli troops had withdrawn.

The new agreement -- reached Sunday night by Israeli Defense Minister Binyamin Ben-Eliezer and his Palestinian counterpart, Interior Minister Abdel Razak Yehiyeh -- was the first since June 2001, when CIA Director George Tenet hammered out a cease-fire that was never implemented.

The CIA talked to both sides as they worked out latest agreement, a U.S. official and sources close to the Palestinians said.

Tenet met earlier this month at his headquarters with Yehiyeh. The CIA subsequently was in touch with Israeli and Palestinian officials, and played a role in working out the agreement, the U.S. official said on condition of anonymity.

Yehiyeh told The Associated Press that redeployment in Gaza would be implemented in stages.

"From our side, we will take all the necessary procedures to achieve internal security and public security in those areas," Yehiyeh said.

In Gaza, Palestinian police checked papers of drivers on a main northern road on Monday. Police officials, speaking on condition of anonymity, linked the checks to the new agreement, saying they would implement all aspects of it.

Israel has said that if the Palestinians act to prevent attacks from Bethlehem and the areas handed over in Gaza, it may hand over more of the West Bank towns it has held since June.

An international task force will meet in Paris on Thursday and Friday to consider ways to reform the Palestinian Authority, which President Bush in June accused of corruption and involvement in terror attacks on Israel.

American, Russian, European Union, United Nations, Norwegian and Japanese officials will attend, as well as officials from the World Bank and the International Monetary Fund.

Shortly after violence erupted in September 2000, Israel imposed stiff restrictions on the West Bank and Gaza Strip, setting up roadblocks, cutting off cities and towns, and decimating the Palestinian economy. Israel contended the measures were necessary to keep attackers out of the country, but the Palestinians charged Israel's goal was to oppress the population and bring down Arafat's regime.

The situation has intensified in recent months. Responding to Palestinian homicide bombings, Israel has twice sent large numbers of troops into West Bank towns and cities. In June, Israeli forces took control of seven of the eight main Palestinian population centers, imposing curfews and maintaining a tight grip. The pullout from Bethlehem would be the first relaxing of the Israeli chokehold since mid-June.

Opposition to the deal came from the violent Hamas and Islamic Jihad, responsible for most of the homicide bombings inside Israel. Charging that the pact was aimed at ending the Palestinian uprising, they pledged to continue their attacks against Israel.

Yehiyeh said those complaining about the agreement "say in other words that they want a continuation of the siege and the continuation of the occupation of the cities."

Also, the council representing Israeli settlers in the West Bank and Gaza harshly criticized the deal. "This is a step that is counter to Israel's security interests," a council statement said. "The Palestinians should be defeated and the war brought to an end." Settlers have been frequent targets of Palestinian gunmen and bombers.

Previous attempts at cease-fires have crumbled under continuing Palestinian attacks and Israeli reprisals.

While the Islamic groups are strongest in Gaza, all the homicide bombers who infiltrated into Israel, most of them members of Hamas and Islamic Jihad, have come from the West Bank. Israeli analysts say the main reason is that there is a security fence around Gaza, keeping bombers out of Israel, while the Israel-West Bank line is mostly unfortified, making infiltration from the West Bank relatively easy.

In the old city of Nablus, Israeli soldiers set off a huge explosion Monday. The military said they blew up a bomb factory where Palestinians had hundreds of pounds of explosives.

In a village near Jenin in the northern West Bank, a 14-year-old Palestinian boy was shot and killed during a clash between Israeli forces and Palestinian gunmen, residents said. The Israeli military had no comment.