Veteran diplomat John Wolf arrived late Saturday amid stepped-up US pressure on both sides to end one of the worst cycles of bloodshed in their 32-month-old conflict and advance on the peace plan championed by President George W. Bush.

Israeli army radio said the military was preparing Sunday to pull out of the northern Gaza Strip following talks late Saturday on handing over security responsibility to the Palestinians.

It said General Amos Gilad, coordinator of Israeli activities in the Palestinian territories, offered the move in return for a Palestinian pledge to prevent militants from launching anti-Israeli attacks from the evacuated areas.

Senior Palestinian security chief Mohammed Dahlan agreed to the deal but was also seeking a pullout from the West Bank town of Bethlehem as well as an end to Israeli incursions and attempts to kill militant leaders, the radio said.

The report did not say when the military might pull out of the northern Gaza Strip, from which the Palestinian militant group Hamas has fired a stream of home-made rockets into Israel, doing negligible damage.

The moves, in line with the peace roadmap, followed one of the bloodiest periods in the Palestinian uprising, with more than 60 people killed since a June 4 Israeli-Palestinian-US summit to launch the plan.

Israeli public radio quoted Prime Minister Ariel Sharon as telling his weekly cabinet meeting Sunday that his forces would continue to take pre-emptive actions to curb Palestinian suicide bombings.

"Israel will continue to act against targets identified as human bombs, and unless the Palestinians decide to destroy the infrastucture of terrorist organisations, Israel will take care of it," he said.

Seven Israeli helicopter strikes in Gaza last week left 27 people dead.

Among them were six members of Hamas, which has carried out scores of suicide bombings, including an attack on a Jerusalem bus that killed 17 people on Wednesday.

Israeli authorities, in accordance with the roadmap, dismantled two Jewish settlement outposts in the West Bank on Sunday. But Israel's Peace Now group said four more had been set up in the past week.

Israeli radio said that Wolf, heading a 12-member US team, began his work as peace monitor late Saturday by conferring with Avi Dichter, head of Israel's domestic intelligence service Shin Beth.

He was also to meet with Sharon, Foreign Minister Sylvan Shalom, Defence Minister Shaul Mofaz and military and security service officials on Monday. Palestinian sources said he would also have talks with Palestinian officials.

Wolf, who has little Middle East experience, was named by Bush to oversee implementation of the plan that provides for a series of confidence-building measures ahead of the creation of a Palestinian state in 2005.

US Secretary of State Colin Powell kept up the heat on both sides to stick to the peace blueprint, telling the American-Arab Anti-Discrimination Committee in Washington that "we have no choice but to move forward".