The restrictions meant the Palestinian Central Council (PCC) was unable to discuss a draft constitution as only 30 of the 121 members were able to attend the meeting.
"
We're giving the message that no one can stop us
"
Yasser Arafat
Israel tightened restrictions on Palestinians in the West Bank and Gaza after a suicide bombing killed 22 people in Tel Aviv on Sunday.
The ban also prevented a Palestinian delegation attending Middle East peace talks planned to take place in London, prompting criticism from the British Government.
Mr Arafat said the meeting of even a few officials, who live in Ramallah, sent out the message that the Palestinian Authority could not be stopped.
Draft constitution
He said Israel was trying to bring the Palestinians to their knees, but insisted his people were like a mountain, "steadfast, and cannot be shaken by the wind".
The meeting had been due to discuss a draft constitution as part of Palestinian Authority reforms demanded by the United States, the main Middle East peace broker, as a condition for statehood.
Palestinian cabinet minister Nabil Shaath said the discussion and approval of the draft constitution would have to wait until the PCC was allowed to meet.
"This constitution would be presented to the people for referendum after discussion by the various Palestinian institutions," he said.
Israeli officials say travel restrictions on Palestinians are aimed at preventing Palestinian suicide bombers from reaching Israeli cities.
The Palestinian Authority said it had nothing to do with the attack and condemned the killing of civilians.
But Israeli Prime Minister Ariel Sharon blamed Mr Arafat for the attacks, saying he had failed to establish a ceasefire.