A senior official said Qurie, at a meeting with Arafat, had withdrawn his resignation, which was prompted by a weekend of unprecedented unrest in Gaza spearheaded by gunmen demanding anti-corruption reforms.

But other officials at the meeting said Qurie had agreed only to serve as prime minister of a caretaker government, signaling that he may not stay on permanently.

Arafat had rejected Qurie's resignation as the former guerrilla leader struggled to defuse the sharpest challenge to his authority since he returned from exile a decade ago.

Qurie, a veteran moderate, had said on Saturday he was quitting over chaos in Gaza. After a cabinet meeting on Monday, he pressed Arafat for security reforms and said his resignation would stand until Arafat gave him a written response.

Since being appointed by Arafat in November, Qurie has chafed at Arafat's unwillingness to cede security powers.

AP adds: Israeli missiles twice struck a Gaza militants' safe house, wounding five, a spokesman for a Palestinian group said, the first Israeli airstrikes in Gaza since internal turmoil broke out over the weekend.

Meanwhile, Israel's moderate Labor Party on Monday demanded legislation to back up Prime Minister Ariel Sharon's Gaza pullout plan as part of its price for shoring up his shaky government.

The two airstrikes, one on Monday afternoon and the second after midnight, targeted the same house in the Shati refugee camp next to Gaza City on the Mediterranean beach, said witnesses and a spokesman for the Popular Resistance Committee.

The spokesman, Abu Abir, said the house was used by Abed Quka, the group's leader in northern Gaza. He was wounded in the first attack.

The Israeli military declined to comment on either air strike. During four years of conflict, Israeli helicopters have targeted dozens of Palestinian buildings and vehicles in Gaza, aiming for militant leaders, headquarters and weapons workshops.