"I have called on President Yasser Arafat to intervene and we have warned the Palestinian Authority that it must restore calm," Mr Barak said.

Stone-throwing incidents soon developed into full-blown exchanges of fire

The expectation had been that Mr Arafat would not allow demonstrators marking what they describe as "Al Nakba [the catastrophe]" to go beyond stone-throwing, so as not to harm secret peace talks being held in the Swedish capital of Stockholm.

However the fragile situation was underlined on Monday morning when the chief Palestinian negotiator, Yasser Abed Rabbo, resigned in protest at the secret talks.

He said they undermined Palestinian unity in dealing with the Israelis.

Clashes

In the worst clashes, on the outskirts of the West Bank town of Ramallah, a gun battle lasted for more than two hours as initial heavy firing gave way to occasional sniping between Israeli soldiers and Palestinians.

Near the West Bank town of Jenin, about 3,000 Palestinians marched toward the Jewish settlement of Ganim, where they were stopped by Israeli troops.

Israeli soldiers used live ammunition

Witnesses said several Israeli soldiers crouched on the ground and fired live rounds into the crowd, injuring four Palestinian policemen and six demonstrators.

Palestinian police returned fire.

In Gaza, black smoke filled the sky as hundreds of demonstrators set fire to tyres and hurled stones at troops guarding the Jewish settlement of Netzarim.

In Bethlehem, Palestinians wrapped in black-and-white checked headdresses waved black flags as they took over the roof of the newly-opened Intercontinental Hotel and attacked Israeli soldiers from above.

The violence was reminiscent of clashes in September 1996, when 80 Palestinians and Israelis were killed in three days of clashes.

Parliamentary backing

In parliament, Mr Barak said the violence showed that the way to peace was not easy.

He warned that absence of an agreement would lead to "Belfast or Bosnia, an interminable, bloody conflict, with much bloodshed on both sides".

The three villages fringe the south and east of Jerusalem

The Knesset voted 56-48 for his plan to transfer three villages - Abu Dis, Eizariyeh and Sawahreh - to full Palestinian control.

In a crucial proviso, Mr Barak said the handover would be delayed indefinitely.

"We decided to present the proposal for confirmation but we will delay the execution of the transfer itself until the reasons for today's violence are clarified," Mr Barak said.

The prime minister had said the vote should be treated as a confidence motion in his rule.

Hardline opposition

Israeli hardliners opposed the idea of handing over the villages to Palestinian control, arguing it would undermine Israel's hold over all of Jerusalem.

Barak: Still determined to push for a peace deal

"Today they fire on our soldiers from Ramallah and tomorrow they will fire on us from Abu Dis," Israeli opposition leader Ariel Sharon told parliament.

Earlier Mr Barak won a cabinet vote to make the transfer and avoid what he called "stalemate and deterioration" in the peace process.

However, six ministers voted against him and one announced his intention to resign.

One of the coalition partners, the National Religious Party, said it might pull out of the government.

In exchange for the handover of the villages, Mr Barak wants the Palestinians to postpone negotiations on a further Israeli troop withdrawal from the West Bank until negotiators have reached agreement on the outlines of a final peace treaty.

The withdrawal was due in June.

One plan backed by the Israelis is to turn Abu Dis into a future Palestinian capital. A parliament building is under construction in the village of 13,000.

Mr Barak has rejected the suggestion that east Jerusalem might become the Palestinian capital.