JERUSALEM, Israel – The final route of Israel’s security barrier around Jerusalem will encompass large areas claimed by the Palestinian Arabs, including their intended capital and the biggest Jewish settlement in the West Bank, Israeli officials confirmed yesterday.

The route would also place a holy site in the town of Bethlehem on the Israeli side of the security barrier, while leaving a Palestinian Arab refugee camp in Jerusalem encircled by a separate fence, the officials said.

Late yesterday, Israeli and Palestinian Cabinet ministers agreed again on a handover of the West Bank town of Jericho to Palestinian Arab security control. Earlier agreements fell through over details about roadblocks.

Israeli officials said the handover is set for Wednesday, to be followed two or three days later by Tulkarem and then Qalqiliya. Two other towns are to be transferred to Palestinian Arab control as well – Bethlehem and Ramallah – but those were not agreed on at yesterday’s meeting between the Palestinian Arab interior minister, Nasser Yousef, and the Israeli defense minister, Shaul Mofaz.

Israel began building the barrier in the West Bank two years ago, saying it was needed to keep out Palestinian Arab attackers. Palestinian Arabs say the structure, which dips into the West Bank, is an attempt by Israel to impose a border without waiting for a peace deal.

The section around Jerusalem is especially sensitive. The Palestinian Arabs hope to establish their capital in east Jerusalem, a traditional Arab commercial, religious, and social center. Israel, which captured east Jerusalem in the 1967 war, claims all the city as its capital.

Prime Minister Sharon convened a meeting of senior Cabinet ministers late Sunday to discuss the route of the security barrier, which got Cabinet approval last month.

Under the plan, the West Bank settlement of Maaleh Adumim, which lies five miles east of Jerusalem, would be on the Israeli side of the barrier, Israeli officials said. About 30,000 Israelis live in Maaleh Adumim, the largest Jewish settlement.

“Does anyone have even the slightest doubt that Maaleh Adumim is an integral part of Israel?” said the Israeli vice premier, Ehud Olmert, who heads a ministerial committee on the Jerusalem barrier.

A senior Israeli official said the committee is planning 11 crossings to allow access from the West Bank.

The official, speaking on condition of anonymity, said construction is to be completed by year’s end and no major changes in the route are expected. A number of legal challenges filed by Palestinian Arab villagers are pending in Israeli courts.

The Palestinian Arab refugee camp of Shuafat, which straddles the Jerusalem municipal boundary, will remain on the Israeli side of the barrier. It will be encircled by a separate fence, with a crossing into the city.

The bustling streets of Shuafat – sandwiched between two Jewish neighborhoods – were buzzing with speculation yesterday about the planned fence.

“Jerusalem is considered to this camp like the heart to the body,” said Mohammed Omar, a 50-year-old teacher in Shuafat. “All their activities are in Jerusalem.”

According to the United Nations, 11,250 people live in the camp, a maze of narrow, dusty streets and densely packed gray concrete buildings. Israeli officials said the camp has been used as a launching point by Palestinian Arab terrorists, and the fence is needed for security.

In Bethlehem, the barrier will divide Rachel’s Tomb, a Jewish shrine, from the rest of the city. Concrete slabs already have virtually cut off Bethlehem from Jerusalem.

Bethlehem’s tourist industry has been devastated by four years of violence. A laborer who works in Jerusalem, Nasser Salama, fears the barrier will cause more hardship.

“There’s no work in Bethlehem. We won’t be able to buy food,” he said.

Palestinian Arab negotiator Saeb Erekat said the route could destroy peace efforts. “This prejudges and prejudices the outcome of permanent status negotiations,” he said.