Arafat told the Palestinians their goal of independence was near
Israel and the US said he would be judged by the actions he took against Palestinian militants.
Israel said Palestinians later fired a mortar round at the Jewish settlement of Rafat Yam in the south of the Gaza Strip, without injuring anyone. Palestinian officials denied the claim.
Mr Arafat said Israel was using the suicide attacks by militants as an excuse to launch a "brutal" war.
"I know what Sharon is aiming at," he said, accusing the Israeli leader of wanting "an escalation" of the violence.
Pledge against militants
"I renew the call to completely halt any activities, especially suicide attacks which we have condemned and always condemned," said the Palestinian leader.
The BBC's Barbara Plett in Jerusalem says it was the strongest appeal he has made so far in this intifada.
But he stressed Israel should also respect the ceasefire, and said the Palestinian Authority was trying hard to implement the recommendations made by US Senator George Mitchell as a basis for peace.
It was Mr Arafat's first address since Israel cut ties with him last week and stationed tanks outside his offices in Ramallah.
In the 25-minute speech, Mr Arafat urged his people to take into account the changed climate following the 11 September attacks on the United States. He also stressed the importance of national unity.
Israeli reaction
A spokesman for Israeli Prime Minister Ariel Sharon said he was sceptical of Mr Arafat's promises, which he hoped would be followed up with action.
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ISRAELI MOVEMENTS:
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"Today is the first day that we had complete quiet in the (Palestinian) territories, which proves one thing: when Arafat wants, there can be complete quiet," said Raanan Gissin.
"Don't make declarations. Start making arrests, start doing what you promised," he added. "He has to dismantle the suicide bombers' assembly line."
Mr Gissin's response was echoed by White House spokesman Ari Fleischer who said "concrete action ... (is) what will be measured and that's what the president will wait and see".
But the United Nations Middle East envoy, Terje Roed Larsen, was more upbeat, saying the speech was one of the most important Mr Arafat had ever given and marked a potential turning point in the search for peace.
He said that in the past 24 hours there had been significant developments on the ground, with Palestinian security forces closing down scores of organisations linked with "terrorist" attacks.
Palestinian police have closed offices affiliated with the militant groups Hamas and Islamic Jihad in the West Bank.
Israeli strikes
The Palestinian leader's speech followed two weeks of sustained bombardment of Palestinian targets and incursions by Israeli forces responding to suicide attacks on Israeli civilians.
Israeli helicopters fired missiles at a Palestinian police station and a security office in the Jabalia refugee camp in the north of the Gaza Strip early on Sunday.
This followed a one-day Israeli incursion into the nearby town of Beit Hanoun to target Palestinian militants.
A number of houses were destroyed by bulldozers, including one building linked to the leader of the military wing of Hamas, Salah Shahada.
Four Palestinians were killed and more than 60 injured during the temporary occupation.