Israeli Prime Minister Ariel Sharon (search) said Monday he will come up with an alternative withdrawal plan after his proposal to pull out of the Gaza Strip and parts of the West Bank was resoundingly rejected by members of his Likud Party (search).

Hours after Sharon spoke, an Israeli attack helicopter fired a missile at a group of armed Palestinians in Gaza's Khan Younis (search) refugee camp early Tuesday, killing two and wounding at least 17, residents and doctors said.

Israeli officials suggested the original plan — which had U.S. backing and was popular with Israelis — would be slightly scaled down and the new version would not be put to a Likud vote.

"I want to say in the clearest fashion there will be another plan," Sharon told a meeting of Likud lawmakers, according to a participant.

Sharon had proposed his "disengagement plan" as the best way to obtain security for Israel in the absence of peace moves and to defuse international pressure for greater concessions.

Members of Sharon's traditionally pro-settler party disagreed, voting against the plan 60 percent to 40 percent in a nonbinding referendum Sunday that the Maariv daily labeled a "crushing defeat" for the premier.

Residents of the Gaza settlement of Neve Dekalim, who had energetically campaigned against the plan, symbolically declared victory Monday by laying the cornerstone for a new neighborhood. "It says we're here to stay," said Esther Lilienthal, 67.

But government officials scrambled Monday to figure out a way to sidestep the Likud voters and proceed with some form of withdrawal anyway, arguing that with peace efforts frozen and violence with the Palestinians continuing, Israel can't afford to sit back and do nothing.

"The question is should Israel lead or be led, does time work in our favor or against us, and is what we are proposing accepted by the world?" Sharon told the Likud meeting, according to an official present.

Sharon said he would present his new plan to parliament and to the Cabinet, but not to another party referendum.

"The Likud members said 'no' to a specific plan, not to all plans," Cabinet minister Tzipi Livni said.

Sharon's original plan envisioned an Israeli withdrawal from Gaza, home to 7,500 settlers in 21 settlements, and the evacuation of four small settlements in the West Bank by the end of 2005.

The prime minister's top aide, Dov Weisglass, spoke Monday with Condoleezza Rice, President Bush's national security adviser, to assure her that Sharon remained committed to carrying out the plan with only minor changes, government sources said.

"He is going to carry on. He is not going to accept the status quo," Vice Premier Ehud Olmert said.

Last month, Bush tried to boost Sharon's chances in the referendum, endorsing the plan and giving him unprecedented assurances that in a final peace deal, Israel would not have to withdraw from all the West Bank.

In Washington, U.S. State Department spokesman Richard Boucher said the vote was a "setback" for Sharon. He said the disengagement plan could still be a way to move peace talks forward, but added, "I don't think we've hitched our wagon to any single effort."

Some Likud officials said they expected a substantial revision of the plan and would not allow Sharon to get away with presenting the same plan with only cosmetic changes.

Education Minister Limor Livnat, who supported Sharon's proposal only reluctantly, said she wanted a new plan that did not include a withdrawal from three settlements in northern Gaza and any settlements in the West Bank.

Moderate members of Sharon's coalition said the disengagement plan had strong public support and demanded it be presented to the Cabinet, saying it was absurd to give a tiny fraction of the population a virtual veto over matters of such vital importance to the nation.

"Sharon promised to fulfill our request to hold a discussion on the issue in the Cabinet," said Justice Minister Yosef Lapid, leader of the centrist Shinui Party. "It isn't possible to leave the political situation frozen."

Interior Minister Avraham Poraz, also of Shinui, threatened to pull out of the coalition in the absence of a peace plan and opposition Labor Party officials threatened to call for new elections.

Olmert said a Gaza withdrawal was inevitable. "There is no alternative," he told Israel's Channel 10 TV. "There is no future for 7,500 Israelis among a sea of Palestinians in Gaza."

Some analysts said the referendum's wide margin of defeat was increased by an attack Sunday by Palestinian militants that killed a pregnant settler and her four young daughters as they were traveling out of Gaza to campaign against the plan.

In response, Israeli troops demolished 22 homes in Gaza, leaving 75 people homeless, residents said. The army said it destroyed several buildings and cleared land where the militants carried out the attack.

After the attack, an Israeli airstrike killed four militants in the West Bank city of Nablus. About 10,000 Palestinians marched in a funeral procession for the men on Monday.

The Israeli military refused to comment on the violence early Tuesday in Gaza's Khan Younis refugee camp. But residents who saw the attack said Palestinian gunmen targeted by the helicopter fired two missiles at Israeli tanks before the helicopter struck. Residents said one of the two dead as a 25-year-old Palestinian gunman.

Also Tuesday, Israeli troops took up positions around Palestinian leader Yasser Arafat's office building in the West Bank city of Ramallah, witnesses said. Israeli military officials said soldiers were arresting suspects, but the operation was not linked to Arafat's office.

Israel occupied the West Bank and Gaza — now together home to some 3.5 million Palestinians — in the 1967 war. The Palestinians consider the settlements in these areas, which house about 220,000 Israelis, to be illegal.