RAMALLAH, West Bank (AP) _ The Palestinian parliament on Monday approved the new position of prime minister as part of reforms sought by the United States, Europe and Israel to curb Yasser Arafat's near absolute powers.

However, it appears the Palestinian leader will retain control over two key issues _ security and peace talks with Israel _ while the new prime minister will deal largely with internal affairs, including naming and supervising Cabinet ministers.

The power-sharing agreement, worked out last week by Arafat and his appointee for prime minister, Mahmoud Abbas, falls short of demands that a new prime minister effectively replace Arafat as the chief peace negotiator.

President Bush has said the Palestinians have to choose new leaders as a precondition for statehood.

Arafat reluctantly agreed last month to name a prime minister, after balking at the idea _ which has become popular among Palestinians as well _ for months. His critics remain skeptical about Arafat's intentions, saying that while the appointment of a prime minister could be presented as genuine reform, they expect the Palestinian leader to put up a fight over relinquishing power.

``It would be a radical change for someone other than Arafat to be exercising broad powers,'' legislator Ziad Abu Amr said Monday. ``It don't think it will be easy for this prime minister to extract power from President Arafat.''

There was no immediate reaction from Israel, where officials have welcomed Abbas' appointment but have been skeptical that he would wrest real power from Arafat.

In other developments Monday, Israeli troops withdrew from a four-square-mile area of northern Gaza they had seized last week in an attempt to stop the firing of homemade rockets at Israeli border towns. At the time, army commanders said the reoccupation was open-ended. The pullback came despite the firing of four Qassam rockets on the Israeli town of Sderot on Monday.

Arafat opened Monday's parliament session with an hour-long, often rambling speech. He revisited familiar themes, including accusations that Israel's military strikes against Palestinian militants amount to ``state terrorism,'' and that Israel is sabotaging peace efforts. He also said he opposes attacks on civilians.

After the speech, legislators approved the creation of the position of prime minister by a vote of 64-3, with four abstentions. Later in the day, parliament was to begin debating the authorities of the new job and pass the needed legislation.

A 10-page draft bill obtained by The Associated Press is in line with the Arafat-Abbas agreement. It says the prime minister reports to Arafat, who has the right to fire him. Arafat remains the commander of the Palestinian security forces, while the prime minister is responsible for public order.

According to the draft, the prime minister ``supervises the work of the ministers'' and chairs weekly Cabinet sessions. The prime minister has five weeks from the day of being elected to form a Cabinet.

Easy approval of the creation of the position had been expected; a majority of the 88 members of parliament are from Arafat's Fatah movement which has been pushing for reform and had urged Arafat to share power.

Abbas was also expected to win the support of parliament. Fatah leaders had demanded that Abbas, a senior official in the movement, be chosen for the job.

Seventy-four of the lawmakers participated in the session at Arafat's compound in the West Bank town of Ramallah. Ten took part via video conference from Gaza City, having been barred by Israel from traveling to the West Bank. Israel has said those 10 have been involved in violent activities.

Terje Roed-Larsen, the U.N. envoy to the Mideast, said the international community had hoped the prime minister would have a key role in negotiations. There was an expectation that ``Abu Mazen would be fully empowered to go back to the table and start negotiation with a 100 percent authorization from the legitimate Palestinian organ,'' Roed-Larsen told Israel Army Radio.

Israel and the United States insist that Arafat hand over authority to a powerful prime minister, retaining only a ceremonial role for himself. The two countries have banned their officials from meeting with Arafat, charging that he has not taken steps to stop Palestinian violence.

Israeli Prime Minister Ariel Sharon has ruled out peace talks with the Palestinians until 29 months of violence are halted, but he has had meetings with Abbas.

Many Israeli leaders have met Abbas and favor his appointment, noting that he is an outspoken critic of attacks on Israelis.