Fighting continues in Beit Jala despite a truce
As America voiced its objections, gunfire continued into the night in the West Bank town, despite an earlier truce which aimed to lead to Israel's withdrawal.
Israel sent troops and tanks into the flashpoint town early on Tuesday to try to end Palestinian gun attacks on nearby Gilo, a settlement which Israelis regard as a Jewish neighbourhood of Jerusalem.
US diplomacy
Mr Powell told Palestinian leader Yasser Arafat the United States was "pressing" Israel to withdraw from Beit Jala.
State Department spokesman Richard Boucher said Mr Powell also called on Mr Arafat "to do everything he can" to end the continuing violence.
The Secretary of State later spoke to both Israeli Prime Minister Ariel Sharon and Israeli Foreign Minister Shimon Peres "about how to achieve an end to the violence", said Mr Boucher.
America sharply criticised Israel's decision to send its forces into Beit Jala, saying there was "a fundamental issue here, and that's trying to reverse agreements and understandings that have been made in the past".
A BBC correspondent in Washington says the statement was the clearest indication so far from the US administration that it believes Israel may have gone a step too far.
Earlier, Mr Peres and Mr Arafat agreed to a tentative ceasefire under which Israeli troops would withdraw from the town once calm had been restored, but fierce fighting has continued.
Truce broken
Israel said the Palestinians fired at Gilo, about half a kilometre (one-third of a mile) from Beit Jala, as soon as the truce went into effect.
Palestinians said they fired their guns into the air in celebration of the truce, which Israel mistook for gunfire aimed at Gilo.
After nightfall, an Israeli tank shell hit a building in the centre of Beit Jala, injuring two people, according to witnesses.
Earlier, five mortar bombs landed on Gilo, causing damage but no casualties, the Associated Press news agency reported.
Israeli Defence Minister Binyamin Ben-Eliezer said Israel had no plans to reoccupy Beit Jala but if Palestinian attacks on Gilo resumed, Israel would "absolutely" move back into the town.
Mr Sharon said two weeks ago Israel would send troops into Beit Jala if attacks on Gilo continued.
Israel's foray into the mainly Christian town is the longest-lasting incursion into a Palestinian-administered area by Israeli forces since the Palestinian uprising began last September.
In April, Israel withdrew its forces from Palestinian-controlled areas of the Gaza Strip a few hours after the US Secretary of State condemned that incursion.