JERUSALEM, Israel – Israeli and Palestinian Arab leaders argued yesterday over a planned troop pullback from the West Bank, with a wary Israel saying it wants to hand over one town at a time and Palestinian Arabs insisting on a large-scale withdrawal.

Israel decided to slow the planned pullout from five West Bank towns after a day of violence Monday strained an informal cease-fire. Israeli security officials threatened to stop the process altogether if Palestinian Arabs don’t halt all attacks on Israeli targets.

Despite the warning, Palestinian Arab terrorists fired three mortar shells at a Jewish settlement in Gaza yesterday. The shells caused no damage or injuries. The Israeli defense minister, Shaul Mofaz, met late Monday with Palestinian Arab negotiator Mohammed Dahlan to discuss a handover of West Bank towns to Palestinian Arab security control.

The meeting was overshadowed by the death of a 10-year-old Palestinian Arab girl in a Gaza refugee camp, followed by a barrage of mortar attacks on nearby Jewish settlements. A day later it was still unclear who fired the fatal bullet, with each side blaming the other.

Yesterday, Israeli press reported that Palestinian Arab security had arrested a man from the Rafah refugee camp for firing the fatal shot. In telephone calls with the Associated Press, officials from all the security services in Gaza denied the reports.

After the mortar attacks, Mr. Mofaz told Mr. Dahlan progress in the West Bank depends on quiet in Gaza.

He said Israel would withdraw from one West Bank city at a time rather than all five at once, Israeli security officials said. The pullout is to begin with Ramallah, the seat of the Palestinian Arab government, the officials said on condition of anonymity.

The handover might begin in coming days, but not necessarily before Prime Minister Sharon and Palestinian Arab leader Mahmoud Abbas hold their first meeting, tentatively set for February 8, the officials added. Mr. Sharon is to meet with senior government ministers Thursday to discuss the handover.

Yesterday, Mr. Mofaz called on the Palestinian Authority to stop the mortar fire. Thousands of Palestinian Arab police have taken up positions throughout Gaza in recent days to restrain terrorists.

Palestinian Arabs objected to the new Israeli position on the West Bank handover, with one senior Palestinian Arab official saying they sought a withdrawal from all five cities at once. He spoke on condition of anonymity.

Mr. Dahlan said yesterday he hoped to reach an agreement with Israel on the pullback and other key issues before next week’s summit. In a step toward that goal, Israel reopened the Rafah crossing between Gaza and Egypt yesterday. It was shut December 12 after Palestinian Arab terrorists tunneled under the Israeli army post there and blew it up, killing five soldiers.

Mr. Mofaz said the Karni crossing – where terrorists killed six Israeli civilians last month – would remain closed until the Palestinian Arabs improve security measures. The Erez crossing in northern Gaza also will remain closed.

The flare-up in Gaza fighting has tested an informal cease-fire worked out by Mr. Abbas that brought rare calm to an area torn by four years of bloodshed.

Also yesterday, Israel’s attorney general overturned a secret government decision to seize Jerusalem land belonging to Palestinian Arabs living in the West Bank, ruling it violates Israeli and international law.

The decision blocked what attorneys for the landowners said was an attempt by Israel to confiscate thousands of acres of Jerusalem land and cement Israeli control over the eastern sector of the city, whose fate is one of the most difficult issues in any future peace talks.

In another development, 38 Jewish families in Gaza signed agreements with the government to move within Israeli borders, Mr. Sharon’s office said.