More than 40 people have been arrested for trying to stop Israel's construction of a "security fence" in the West Bank.
Ariel Sharon says work on the fence will continue
The activists - most of them foreigners - had camped in front of the home of a Palestinian family they said would be isolated by the fence near the town of Qalqilya.
The arrests came a day after unnamed US officials said Washington may consider cutting loan guarantees to Israel as a penalty for building the barrier.
Proponents of the project say the fence is a necessary defence against Palestinian militants infiltrating into Israel, while opponents say it is an attempt to define borders unilaterally.
Foreign activists of the International Solidarity Movement were among those detained on Tuesday.
An Israeli police spokesman said three demonstrators - an Italian, an Israeli and a Palestinian - are accused of assaulting a soldier.
The others were detained for refusing to leave what Israel called a closed military area.
The police are reported to be considering deporting the foreigners.
US officials quoted by several sources said the Bush administration was debating whether the construction of the 600 kilometre-long (370-mile) barrier is related to Jewish settlements.
Congress is authorised to cut US aid to Israel by the amount Israel spends on settlements in the West Bank and Gaza.
At issue is the $9bn in loan guarantees approved by the US Congress in March, and $1bn in military assistance.
The warning noises from Washington came as efforts to move forward the peace process suffered more setbacks.
Talks between Israeli Prime Minister Ariel Sharon and his Palestinian counterpart Mahmoud Abbas, scheduled for Wednesday, have been called off.
ROADMAP MAIN POINTS
Phase 1 (to May 2003): End to Palestinian violence; Palestinian political reform; Israeli withdrawal and freeze on settlement expansion; Palestinian elections
Phase 2: (June-Dec 2003) Creation of an independent Palestinian state; international conference and international monitoring of compliance with roadmap
Phase 3 (2004-2005): Second international conference; permanent status agreement and end of conflict; agreement on final borders, Jerusalem, refugees and settlements; Arab states to agree to peace deals with Israel
Mr Abbas - also known as Abu Mazen - cancelled the talks "because it will only be ceremonial... and he believes the Israelis are not doing enough to promote the roadmap", the internationally-backed peace plan for the region, a Palestinian spokesman told the Reuters news agency.
Despite the cancellation, Israel announced that it would go ahead with the release 339 Palestinian prisoners on Wednesday afternoon local time, taking them by bus to the West Bank.
It will release a further 99 inmates at an unspecified later date, the Israeli newspaper Haaretz reported.
Prisoners who refuse to promise not to engage in violence against Israel will not be freed, the paper reported.
Palestinian leaders have criticised Israel for releasing only a small number of the roughly 6,000 prisoners it is believed to hold.
The Palestinian leader, Yasser Arafat, described the move as a fraud, saying the Israelis would free some Palestinians but arrest others.
Last week Israel announced that the first 145-kilometer (90-mile) section of the security fence had been completed. The rest is still in the planning stages.
The planned structure reaches deep into the West Bank in some parts, to include Israeli settlements.
US and Palestinian officials fear it may serves as a political border that would hinder plans to set up a Palestinian state.