JERICHO, West Bank – Israel and the Palestinian Arabs deadlocked yesterday over returning control of West Bank towns to Palestinian Arab control, extending a stalemate that threatens to increase frustration, anger, and the risk of more violence after a month long truce.

Despite the risk of losing momentum in peace efforts, both sides clung to their positions.

The Palestinian Arabs insisted Israel remove army roadblocks around the towns and lift travel restrictions. Israel said it cannot take security risks until Palestinian Arab security forces do a better job reining in terrorists.

The quiet, isolated oasis of Jericho was the unlikely focus of the disagreement. Its handover had been expected to be a relatively simple affair, and the unexpected stall raised concerns that the two sides would have worse trouble settling far thornier issues down the road.

Washington’s new envoy, William Ward, an American Army general, was due to take up his new post today, and Paul Patin, spokesman for the American Embassy in Tel Aviv, raised the possibility that General Ward would intervene in the negotiations.

“Security coordination is his brief,” he said.

In Cairo, Egypt, the new Palestinian Arab foreign minister, Nasser al-Kidwa, said there will be no Israeli-Palestinian peace if Israel keeps building its contentious separation wall and does not remove Jewish settlements from Palestinian Arab territories.

Mr. al-Kidwa, making his trip as foreign minister to confer with his counterpart, said Israel has also not honored commitments, including the release of Palestinian Arab prisoners, made during a summit last month with the Palestinian Arab, Egyptian and Jordanian leaders.

The U.N. Security Council restated its endorsement of an independent Palestinian state living in peace with Israel and stressed that the international community must continue playing a key role to help the Palestinian Arabs create the institutions of good government.

In the handover dispute, two meetings of Israeli and Palestinian Arab security commanders in Jericho broke up without agreement, and no new talks were scheduled. The breakdown came a day after Palestinian Arab leader Mahmoud Abbas and the Israeli defense minister, Shaul Mofaz, failed to settle the dispute over the roadblocks north and south of Jericho.

Prime Minister Qurei accused Israel of dragging its feet, and the terrorist Islamic group Hamas warned that Israel “will be held fully responsible for the consequences.”

In a curious twist, the disagreement over Jericho appeared to focus mostly on a gleaming luxury casino and hotel just outside town. Built during the heyday of Israeli-Palestinian peacemaking in the mid-1990s, the Oasis casino closed after the outbreak of violence in the fall of 2000 kept away its mainly Israeli customers.

Many Palestinian Arabs in Jericho are hoping that peace will bring the Israelis back, restoring jobs and boosting the town’s battered tourism-based economy. At its height, the casino and adjacent hotel employed 1,600 Palestinian Arabs and 450 foreigners, but now only about 60 workers maintain the building.