By Kathryn Westcott
The question of Mr Arafat's burial has taken on a huge symbolism. The Palestinian leader had wanted to be buried in Jerusalem but Israel ruled this out.
The muqata has become a symbol of Palestinian "steadfastness"
He will now be buried at his Ramallah headquarters, the muqata, where he was held virtual prisoner by Israel for almost three years.
Mr Arafat had privately told aides that he wanted to be buried near Jerusalem's al-Aqsa Mosque, Islam's third holiest shrine. But Israel favoured a burial at Mr Arafat's family's plot in Khan Younis in the Gaza Strip, mainly because of Gaza's isolation.
A Jerusalem burial was deemed unacceptable to the Israelis because of the great symbolism attached to the city. Israel claims it as its "eternal and undivided" capital, while Palestinians hope to establish a capital in occupied East Jerusalem.
Burying Mr Arafat there would only have bolstered Palestinian claims to the city. Also, for most Israelis, having a man they see as an enemy buried so close to a Jewish holy site would have been intolerable.
Justice Minister Yosef Lapid made this clear when he told Israeli television: "Jerusalem is a city where Jews bury their kings. It's not a city where we want to bury an Arab terrorist, a mass murderer."
Palestinian aides have suggested that Mr Arafat's body will be placed in a stone coffin, rather than a wooden one, to allow his re-interment at a later time in Jerusalem.
In the face of Israel's refusal to allow a Jerusalem burial, Palestinian officials turned to Washington for help in persuading Israel to allow Mr Arafat to be buried in the West Bank, according to reports in American newspapers.
According to a report in the New York Times, White House officials were relieved that the Palestinians were prepared to compromise on a Jerusalem burial and reacted favourably to the Ramallah suggestion.
The Palestinian leader will now be interred at his sandbagged West Bank headquarters just a few kilometres from Jerusalem. There is speculation that a mosque will be built next to the site.
The Israelis promised to allow Mr Arafat to return to Ramallah
"The muqata became the symbol of the steadfastness of the Palestinian people, the president's place of siege," chief Palestinian negotiator Saeb Erekat said.
Israel will no doubt have been uncomfortable with this arrangement, which reinforces Ramallah as a symbol of resistance in the West Bank. But the Israelis may have been swayed by American diplomacy.
Negotiations have also focused on funeral arrangements for Mr Arafat and how foreign leaders would be able to mark his passing.
Egypt has stepped in and offered to allow his funeral to be held in Cairo. This would take the arrangements out of the hands of Israel.
The King Faisal bin Abdul Aziz Mosque, near the international airport, has been suggested as a possible venue.
Who will attend Arafat's funeral?
Egypt - President Hosni Mubarak
EU - Foreign policy chief Javier Solana
Germany - Foreign Minister Joschka Fischer
Jordan - King Abdullah
Pakistan - Prime Minister Shaukat Aziz
South Africa - President Thabo Mbeki
There will also be a horse-drawn carriage to a military airbase after the ceremony, from where the body will be flown to Ramallah in the West Bank for burial.
According to British Middle East analyst George Joffe, a service in the occupied territories would have been problematic, as heads of state would have been reluctant to ask Israel's permission to attend.
"They would not want to be seen to be recognising Israeli authority over the occupied territories," Mr Joffe told the BBC.
He said this would have dramatically limited the number of people who could have come from the Arab and Muslim world.
Mr Joffe also said there would also be a question of European statesmen attending. He said Israel would have had difficulties accepting some of them.
The issue of security would no doubt have been uppermost in the minds of many foreign dignitaries.
The Americans, notably, would have questioned whether the weakened Palestinian security forces could guarantee the safety of any representative.