JERUSALEM (AP) _ Yasser Arafat will retain control of security forces and peace negotiations even after his deputy Mahmoud Abbas is appointed prime minister, a senior Palestinian official said Sunday.

The deal would sidestep key reform demands by Israel and the United States that Arafat hand over authority to a powerful prime minister and retain only a ceremonial role. The two countries have banned their officials from meeting with Arafat, charging that he has not taken steps to stop Palestinian violence.

Arafat made the agreement at a meeting Friday with Abbas, also known as Abu Mazen. Arafat said the Palestine Central Council, a PLO policymaking body, on Sunday approved the appointment of Abbas, whom he called ``my brother.''

Council head Riad Zanoun said Arafat has the power to appoint and dismiss the premier, whose ``duty will be to help President Arafat.''

Zanoun added that Abbas would ``be in charge of the negotiating file.''

Israeli officials were not immediately available for comment.

The Palestinian legislature was to meet Monday to choose Abbas as premier. Approval of the deal is considered automatic, since their Fatah movement dominates the parliament.

Arafat agreed to name a prime minister last month, giving in to pressure from the United States, Israel, Europe and his own people for wide-ranging reforms of his corruption-ridden regime. Arafat supporters counter that he is their elected president.

Additional pressure for a leadership change came from European donors and Arafat's own people, who criticized his regime for corruption and inefficiency. Handing control of finances and day-to-day functions in the Palestinian Authority over to Abbas, as the agreement stipulates, might satisfy those demands.

Abbas had said he would not assume the post if it is only ceremonial, without executive duties. Arafat, who has been the sole leader of the Palestinian movement for nearly four decades, has been reluctant to give up any of his control.

The Palestinian official, who spoke on condition of anonymity, said Abbas would have the authority to name a new Cabinet, and a number of ministerial changes are expected. In June, the parliament forced Arafat to reshuffle his Cabinet.

Also, Abbas would oversee the work of the ministers and would be empowered to convene the Cabinet by itself, instead of the weekly meeting of the ``Palestinian leadership,'' which includes the Cabinet, PLO executive committee and heads of security services.

However, the Palestinian leadership, controlled by Arafat, would have authority over negotiations with Israel, the United States and other international parties. Abbas could take part in negotiations, but he would have to report to Arafat.

Many Israelis have met Abbas and favor his appointment, noting that he has publicly criticized the violent Palestinian uprising, which began in September 2000 and is still going on.

Former Foreign Minister Shimon Peres of the moderate Labor Party said that the appointment is less significant than the power retained by armed forces outside the realm of the Palestinian Authority, like the militant group Hamas. However, he supported Abbas in principle.

``I believe he will make a very serious effort to extract the Palestinian side from the current situation,'' he told Israel TV.

Tension continued Sunday, a day after Israeli forces killed a top Hamas leader in Gaza in a helicopter missile strike.

Israeli Defense Minister Shaul Mofaz told Army Radio on Sunday that Israel would press ahead with its campaign against Hamas after the killing of Ibrahim Makadmeh, a Hamas founder and military commander.

Near the West Bank town of Tulkarem, a shepherd was killed when a package he picked up exploded. Palestinian security officials said militants apparently hid the bomb in the field.

Meanwhile, American and Israeli flags on Sunday draped the coffin of an American teenager killed with 15 Israelis when a suicide bomber blew up a bus last week in the coastal town of Haifa. Abigail Litle, 14, was the daughter of a Baptist minister who moved from Harrisonville, Mo., to Israel in 1989.

Two other Americans killed in a separate Palestinian attack, a married couple originally from Maryland, also were buried Sunday in Jerusalem. Rabbi Elnatan and Dina Horowitz were shot Friday by Palestinian militants at their home in the West Bank settlement of Kiryat Arba.

Statistics released by the Israeli government Sunday show that more than two years of violence in the West Bank and Gaza apparently are bringing construction to a near halt as Israelis hesitate to move to the settlements, despite government subsidies.

Only 206 new apartments were sold in the area in 2002, compared with 733 the year before, the statistics said.

About 200,000 Jews live in the settlements. Palestinians demand their removal, with a halt to all construction as a first step.