The Israeli Government decision ... is a provocative act and will have a very negative effect on the Eilat talks

Palestinian official Nabil Amr.

Chief Palestinian negotiator, Yasser Abed Rabbo, said the plan was dangerous for the peace process.

In a separate development, there were scuffles in the West Bank city of Hebron when Israeli soldiers forcibly removed Jews illegally trying to establish a new settlement outpost.

Long road

The talks in the Israeli resort of Eilat are aimed at drafting a framework for a final settlement.

Before meeting his Israeli counterpart, Oded Eran, Mr Abed Rabbo said the negotiations could not be successful unless Israel gave an "expeditious and appropriate" response to his request to cancel the expansion.

Abed Rabbo and Eran: Slim hope of success

"Actions like this [plan] gravely harm the current negotiations," he said.

Negotiators plan to remain in seclusion in a hotel until Tuesday but despite the tense atmosphere, negotiators ended Sunday's session with a group splash in the hotel pool.

Previous talks have made little headway and senior Palestinian and Israeli negotiators have warned that a May deadline to conclude the outline peace deal may not be met.

President Clinton, who is personally involved in the mediation, has expressed hope for progress in the negotiations.

The future of settlers in the West Bank is one of the most contentious issues to be resolved during the talks.

US mediator Dennis Ross is due to fly to the region to participate in the negotiations on Tuesday.

The US has said it is prepared to play a more active role in the Palestinian track at the request of both Israel and the Palestinians.

'Goodwill gesture'

Earlier, in a bid to boost the peace talks, Israel said it intended to hand over full control of three Arab villages on the outskirts of Jerusalem to the Palestinians.

One of the three, Abu Dis, is sometimes suggested as a future Palestinian capital.

Jerusalem's Dome of the Rock is clearly visible from Abu Dis

The handover is a highly symbolic gesture, giving Yasser Arafat's Palestinian Authority a toehold close to the centre of Jerusalem.

Israeli Communications Minister Binyamin Ben-Elizer said Israel was ready to give full control of the villages to the Palestinians as a "goodwill gesture".

Correspondents say Israeli hardliners, including some in Prime Minister Ehud Barak's government, are likely to resist the move.

Redeployment

A full treaty addressing borders, the status of Jerusalem, the future of Jewish settlements and the fate of Palestinian refugees is scheduled for September.

Senior Palestinian negotiator, Saeb Erekat, said interim issues, which include Israeli withdrawals from the West Bank, would be discussed separately at Eilat.

"We expect the Israeli side to come with answers on the third and final phase of redeployment from the West Bank, so it can be carried out by the agreed deadline in June," Mr Erekat said.