Israeli opposition leader Yossi Sarid postponed a planned meeting with Mr Arafat, originally scheduled for Sunday night, following the explosion. The attack came shortly after a meeting between Israeli and Palestinian security officials ended with conflicting reports on whether progress had been made. Israeli sources said they had reached agreement on putting in place new measures to end nearly seven months of violence. But the chief Palestinian negotiator at the meeting, General Abdelrakez al-Mjaidada, said Israel's response to Palestinian concerns about territorial incursions was insufficient. Shortly after the meeting, the badly beaten body of a Jewish settler was found in the West Bank town of Ramallah.
Police believe the attack was politically motivated.
More than 460 people have died since the Palestinian uprising began last September - the vast majority of them Palestinians, but also at least 70 Israelis.