BETHLEHEM, West Bank, 21 August - The Israeli Army handed control of Bethlehem back to the Palestinian security forces early yesterday but pressed on with killings elsewhere. Three Palestinians were shot dead and an Israeli soldier was killed as the violence dragged on.

Israeli forces killed the brother of the leader of Popular Front for the Liberation of Palestine yesterday, drawing a threat of retaliation and shaking the new Israeli-Palestinian security deal.

Mohammed Saadat's bloodied body lay in a courtyard as weeping neighbors surveyed the scene in the West Bank city of Ramallah.

His brother, Ahmed Saadat, is the leader of the Popular Front which assassinated ultra-nationalist Israeli Tourism Minister Rehavam Zeevi last year after Israel killed then-PFLP chief Abu Ali Mustafa.

Mohammed Saadat was shot in the head as Israeli Army special forces tried to arrest him outside his house in the West Bank town, the security officials said.

With a strong show of force the army raided a Palestinian refugee camp in Tulkarm in the northern West Bank.

Soldiers conducted house-to-house search for wanted Palestinians. The troops entered early morning into the camp supported by helicopters.

Issam Jayusi, a 27-year-old member of the Al-Aqsa Martyrs Brigades was killed in an exchange of fire, Palestinian security sources said.

The army recently killed the group's Tulkarm leader in one of its so-called "targeted killings".

Palestinian witnesses had said earlier that four Palestinians were wounded in the operation in Tulkarm.

Ayman Zorab, a 15-year-old Palestinian boy, was shot dead by soldiers posted near the Jewish settlement of Morag in the southern Gaza Strip, Palestinian medical sources said. The third Palestinian was also killed in Gaza Strip.

A 19-year-old Israeli soldier Kevin Cohen was killed by a sniper from the Ezzedin Al-Qassam Brigades near the Jewish settlement of Gush Katif in the central Gaza Strip in the morning, the army said.

Under the "Gaza, Bethlehem First" plan agreed on Sunday, Israeli forces moved out of the autonomous West Bank town, which had been re-occupied in mid-June along with almost all of the West Bank.

Residents of Bethlehem said yesterday morning that Palestinian police, most of them unarmed, were patrolling the streets of the city.

They pointed out that much of the security infrastructure in the city had been destroyed, with no police stations left intact after weeks of Israeli reoccupation.

Both sides say the move is a first step in a gradual withdrawal aimed at easing tensions, alleviating the plight of the Palestinian population at large and eventually reviving the comatose peace process after almost two years of fighting.

The army said troops would remain in positions around the town or at nearby roadblocks.

Palestinian officials told AFP that about 100 Palestinian policemen had arrived in a convoy of about a dozen jeeps from nearby Jericho, the only main West Bank town not reoccupied by Israel.

They deployed around the headquarters of Bethlehem's governor, where officials from Palestinian security services, including West Bank security chief Haj Ismail, were meeting over the withdrawal plan, the sources said.

If the plan works, it would be extended to other areas, but Palestinian groups have vowed to thwart it and continue attacks on Israeli targets.

The Palestinian Minister for Planning Nabil Shaath yesterday defended the agreement.

"This security agreement is a new attempt to find out whether the Israelis really intend to withdraw from those territories which they have occupied since Sept. 28, 2000", Shaath said in Cairo.