It was the first time he had ventured outside Ramallah since the Israelis lifted their five-month siege of his headquarters on 2 May.

Jerusalem is the capital of our independent state of Palestine, never mind who agrees or does not

Yasser Arafat

Mr Arafat told supporters in Nablus that a Palestinian state would be established with Jerusalem as its capital.

At the weekend, Israel's dominant party, Likud, ruled against ever allowing the Palestinians statehood.

Crowds turned out to meet the veteran Palestinian leader but a planned visit to the Jenin refugee camp had to be cancelled amid fears for his security.

"Jerusalem is the capital of our independent state of Palestine, never mind who agrees or does not," Mr Arafat told a crowd of 300 in a hall in Nablus.

Arafat highlighted damage caused by Israeli forces in the West Bank

The enthusiastic crowd chanted "We sacrifice our blood and our soul for Arafat".

Likud's rejection of statehood amounted to the destruction of the Oslo peace accords, he said earlier.

In Bethlehem, Mr Arafat visited the Church of the Nativity where Palestinian militants were holed up for more than five weeks before a deal was reached last week on their release.

He entered the church escorted by armed bodyguards and priests, remarking that the place would never be forgotten by Palestinians.

Anger in Jenin

Mr Arafat had planned to see the battle-scarred refugee camp in Jenin but his security officials decided against it as crowds swelled around the podium erected for him inside.

The BBC's Malcolm Brabant - reporting from the camp - said chaos and pandemonium reigned, with people jam-packed around the podium. But Mr Arafat flew over the camp in a helicopter, after making only a brief visit to the camp's outskirts.

Arafat supporters waited for him in the ruined central square of Jenin camp

"I'm very angry and very disappointed because Arafat did not visit the camp" Mohammed Abu Ghalyoun, a 43-year-old unemployed labourer, told the Associated Press.

"If he isn't interested in us, we are not interested in him. We can endure our burdens without him."

On a visit to Jenin's town hall, Mr Arafat embraced relatives of a militant leader, Yusuf Qabha, who was among about 50 Palestinians Israel says it killed there - a figure hotly disputed by the Palestinians.

He compared the battle in the camp to the Nazis' siege of Soviet cities, referring to the camp as "Jeningrad".

Likud fallout

The Likud resolution was passed against Israeli Prime Minister Ariel Sharon's wishes at a stormy central committee meeting on Sunday.

US Secretary of State Colin Powell stressed on Monday that he believed Mr Sharon was committed to an eventual Palestinian state despite the vote.

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"I don't think it changes Prime Minister Sharon's basic thinking about this subject where he was inclined to move forward to a Palestinian state at some point in the future," said Mr Powell.

The vote was a victory for Mr Sharon's party rival, Binyamin Netanyahu, who had tabled the motion.

The resolution will govern future actions of Likud ministers, but it is not clear whether it is binding on Mr Sharon, who leads a broad-based coalition which includes Labour ministers who favour a Palestinian state.

Mr Netanyahu insisted that Sunday's vote was not intended to unseat Mr Sharon, saying the prime minister was "greatly respected".

In another development, Defence Minister Benjamin Ben-Eliezer told parliament on Monday that an expected security operation against Palestinian militants in the Gaza Strip had been called off after suspects were reported to have fled.

He also urged a "diplomatic solution" to the conflict with the Palestinians, saying that otherwise there would be new attacks on Israel "as bad as or worse than" the suicide bombing in Rishon Letzion which killed 15 people last week.