TULKARM - An explosion Palestinians blamed on Israel killed a militant in Yasser Arafat's Fatah faction on Monday, drawing swift revenge from gunmen who declared a truce over and shot dead a soldier.

The violence, followed by night-time gun battles between Palestinian fighters and Israeli soldiers in the West Bank, dealt a new blow to hopes that U.S. mediation would staunch more than 15 months of bloodshed.

Palestinian security sources said Raed al-Karmi, an Al-Aqsa Martyrs Brigades militant who survived a missile attack on his car last September, was killed by a bomb planted by Israel near a house where he had been hiding in Tulkarm, a West Bank city.

Israeli security sources said Israel was behind the explosion, but the army declined comment and government officials neither confirmed nor denied Israeli involvement.

Prime Minister Ariel Sharon, stopping short of claiming responsibility for Karmi's death, told reporters: "Israel will continue to act against terror because there is no room for compromise with terror."

Fatah sources said Karmi was killed when a bomb placed on a cemetery wall near his house exploded as he walked past.

The Al-Aqsa Martyrs Brigades promised quick retaliation for the death of the 28-year-old militant who Israel said was behind the killing of at least nine Israelis.

Hours after the blast, the Brigades claimed responsibility for a shooting which the Israeli army said killed a soldier and wounded an officer near the West Bank city of Nablus.

"The Aqsa Brigades have fulfilled their promise," the group, an unofficial armed contingent within Fatah, said in a statement faxed to Reuters.

"This operation comes as a swift retaliation for the assassination of our leader, Raed al-Karmi, and for the demolition of homes which has left families homeless in Rafah."

The statement referred to Israel's internationally condemned demolition last week of dozens of houses in the southern Gaza Strip that the army said were used as cover for gunmen or tunnels through which weapons were smuggled from nearby Egypt.

Israel demolished nine Palestinian homes in Arab East Jerusalem on Monday that had no building permits. Palestinians say such permits are nearly impossible to obtain.

The Brigades said a ceasefire Arafat announced on December 16, under intense international pressure following suicide bombings in Israel, was dead.

"The enemy is still carrying out assassinations and bloody operations against our people and therefore this ceasefire agreement is not binding," the statement said.

Palestinian legislator Hanan Ashrawi called Karmi's death a "crime against humanity" and said international intervention was needed to stop such attacks.

Official confirmation from Israel that it blew up Karmi would mark the first use of its internationally condemned policy of tracking and killing militants since Arafat's ceasefire call.

Israel has killed dozens of Palestinian militants since the start of a Palestinian uprising against Israeli occupation in September 2000, saying it was acting in self-defence.

In a November interview with an Israeli paper, Karmi said he shot dead two Tel Aviv restaurant owners, while they were on a West Bank buying trip early last year, to avenge Israel's killing of Thabet Thabet, a Fatah leader, in December 2000.

At least 804 Palestinians and 239 Israelis have been killed since the uprising began. Nampa-Reuters