The cabinet meeting is the first since the Palestinian leader, Yasser Arafat, signed the peace deal in the United States last week.

His aide, Tayeb Abdel Rahim, said a few ministers opposed the agreement, but he did not elaborate.

The Israeli Government last week delayed taking a decision on the peace accord indefinitely, complaining that the Palestinians had not submitted a detailed security plan.

After earlier dismissing a Palestinian crackdown as a public relations stunt, Israel has now demanded that the Palestinian Authority arrest a leader of the radical Islamic group Hamas.

Not a threat

Prime Minister Binyamin Netanyahu said Israel was increasingly suspicious that the leader of the movement's military wing in Gaza was involved in Thursday's suicide bombing of an Israeli school bus which killed one soldier.

Paul Adams in Jerusalem: The Palestinian crackdown is exactly what the Israeli government wants to see

"If Mohammed Deif is not arrested, the attacks will continue and the peace process will halt," Mr Netanyahu said in a news release.

Mr Netanyahu's spokesman described the statement as an observation and not a threat.

Israel's demand comes despite a Palestinian crackdown on Hamas following the bombing in Gaza.

Hamas leader Sheikh Yassin is under house arrest

Hamas leader Sheikh Ahmed Yassin has been placed under house arrest and hundreds of Hamas activists have been rounded up.

Sheikh Yassin's phone lines are reported to be cut and security officials posted outside his Gaza home.

Mr Netanyahu's spokesman said the clampdown did not reflect a true desire to destroy the Hamas infrastructure.

Mr Arafat earlier condemned the bombing and told reporters that it was "aimed to prevent the implementation" of the new agreement and attacked "Palestinian national interests."

The authority is due to present a security plan to Israel by Monday.

The BBC Jerusalem Correspondent, Paul Adams, says the Palestinian measures against Hamas are the most drastic so far, and the action against the Sheikh is bound to trigger resentment among many Palestinians.