Their bases dismantled and the Jewish settlements they guarded in ruins, Israeli troops were poised for a swift withdrawal that will leave the Palestinians with a volatile testing ground for statehood.

"The cabinet has unanimously approved ... the formal cancellation of the military government in Gaza," Prime Minister Ariel Sharon's office said in a tersely worded statement.

The last obstacle was cleared when the cabinet, in an emotionally charged debate, decided not to level 19 settlement synagogues, which will be the only buildings left standing in the 21 enclaves evacuated and demolished last month.

The Palestinian Authority had demanded the army tear down the synagogues, hated symbols of Israel's occupation of the coastal territory where 1.4 million Palestinians live.

But the cabinet, including Sharon himself, reversed an earlier decision to raze the synagogues after rabbis said destroying them would be a greater sin than possible desecration by Palestinians.

Palestinians were watching the end of Israel's military presence, marking the first removal of settlements on land they want for a state, with a mixture of joy and scepticism.

They fear Sharon is trading the tiny territory for a permanent hold on larger areas of the occupied West Bank where 245,000 settlers live isolated from 2.4 million Palestinians.

In a sign of tensions, the departing army called off a Gaza handover ceremony on Sunday after Palestinians said they would boycott it in anger over Israel's failure to agree on allowing freedom of movement to and from the strip.

Sharon stoked Palestinian anger when he reiterated in a Washington Post newspaper interview that despite US objections Israel would keep building in large West Bank settlement blocs it intends to keep under any future peace deal.

Sharon's rightist opponents call the Gaza pullout a betrayal of Jewish claims on biblical land and a reward for a Palestinian uprising. But US-led mediators see it as a possible catalyst for renewed peacemaking after five years of violence.

Looking on impatiently from nearby hilltops, Gazans prepared to take to the streets in celebration.