Beirut, Lebanon ? For the first time in the Middle East conflict, the Arab world has come together and agreed on a peace plan that offers Israel normal relations in exchange for a full withdrawal from war-won lands and a Palestinian state.

The overture adopted Thursday by the Arab League set demands long resisted by Israel  including making east Jerusalem the Palestinian capital and finding a “just solution” for refugees. But it represented a major change in the Arabs’ approach to Israel, breaking with the mindset of 23 years ago, when Egypt was shunned for signing a peace treaty with Israel.

The news out of Lebanon was tempered early today when Israeli tanks surrounded Palestinian leader Yasser Arafat’s West Bank office in Ramallah as Israel’s Cabinet decided to isolate Arafat in response to Palestinian terror attacks, a Cabinet minister said.

The United States welcomed the Arab leaders’ unanimous endorsement of the Saudi proposal. “We hope other leaders in the region accept the plan as well,” White House spokesman Gordon Johndroe said.

Israel called the proposal “a very interesting development, something that should be pursued.” But Israel has reservations, said Raanan Gissin, an adviser to Prime Minister Ariel Sharon.

Gissin insisted Arab nations must open “direct negotiations with Israel” and underlined Israel’s rejection of the return of Palestinian refugees. Sharon has long ruled out a withdrawal to the country’s 1967 borders, though he has not specified what he would offer for peace.

U.S. State Department spokesman Richard Boucher said the peace plan, first drawn up by Saudi Crown Prince Abdullah, “can help shape a more positive environment for peacemaking.” The United States is trying to forge a cease-fire in 18 months of Israel-Palestinian violence.

Arafat said Thursday that he was ready to work for “an immediate cease-fire” with Israel. But his comments appeared to be short of the direct call for a truce that the United States is pressuring the Palestinian leader to make after a suicide bombing on Wednesday in Israel killed 20 people.

In that attack, a bomber sent by the Islamic militant group Hamas blew himself up in a hotel dining room in Netanya crowded with people getting ready for a Passover feast.

Hamas on Thursday rejected the Arab initiative. A Hamas official in Beirut, Osama Hamdan, said “the resistance and the intefadeh (uprising) will continue in all forms.”

Challenge to Israel

The Arabs presented their proposal as a challenge to Israel to indicate that it is prepared to compromise on long-held beliefs for peace.

“Now, we have a sharp weapon to influence the international community and pressure Israel,” Saudi Foreign Minister Prince Saud al-Faisal told the news conference ending the two-day summit, which was at times clouded by inter-Arab rivalries. “If Israel refuses peace, we will return to violence. We will return to the threat of widening conflict and to instabilities and God knows what happens.”

Abdullah, whose country has added clout in the Islamic world because of its role as protector of Islam’s holiest sites, first floated a broader version of the Arab proposal last month.

He presented a more detailed plan to the summit Wednesday, which Arab leaders wrangled over through the next day. The final version calls for a full Israeli withdrawal from Arab land seized in the 1967 Mideast war: the Palestinian territories, east Jerusalem, Syria’s Golan Heights and a patch of land claimed by Lebanon.

In return, the Arab states would “consider the Arab-Israeli conflict ended, and enter into a peace agreement with Israel, and provide security for all the states of the region (and) establish normal relations with Israel,” according to the official text of the offer.

Shifting views

The Arab League functions on consensus, so adoption of the initiative means hard-liners like Syria and Iraq signed on along with moderates such as Egypt and Jordan.

Israel rejects the return of the 3.5 million Palestinian refugees scattered through the Arab world, saying that it would undermine the Jewish character of the state. The Arab proposal’s reference to a “just solution” to the question could leave room for negotiating compensation rather than resettlement.

Approval of the proposal brings the Arab League nearly 180 degrees from 1979, when Egypt was kicked out of the organization for signing a peace treaty with Israel. Arab nations boycotted Egypt, and the league moved its headquarters from Cairo to Tunis, only moving it back 10 years later when Egypt was uneasily forgiven and readmitted.

Though Arab leaders may have shifted their official views, some Arab citizens still feel only force can win their demands from Israel  a sentiment that has strengthened in the past 18 months.

In recent days, thousands of protesters have turned out in Lebanon, Syria, Egypt and Yemen opposing the prospect of eventually exchanging ambassadors with Israel, trading with it or having Israeli tourists in their countries.

Among Palestinian refugees, feelings are strongest and directed not only at Israel but at Arab governments who’ve been unable to help their cause over the years.

“This summit, like previous summits, will be futile,” said Hayat Othman, a 42-year-old Palestinian nurse in the Sabra refugee camp in Lebanon. “What has been taken by force can only be regained by force,” she said, repeating a phrase coined by Gamal Abdel-Nasser, Egypt’s late leader, in the wake of the Arabs’ defeat in the 1967 war.

Shows of unity

The summit that produced the historic overture was clouded by the absence of the leaders of the Palestinians, Egypt and Jordan. But all three leaders back the plan, and the Arab League plans to appoint a committee to promote it to the United Nations, United States, Russia, Islamic states and the European Union.

After a chaotic and divisive opening day, Arab leaders played up shows of unity Thursday. The Palestinian delegation was applauded as it entered the summit hall Thursday a day after storming out of the session, furious with Lebanese leaders for barring Arafat from directly addressing the summit.

Saudi Arabia’s Abdullah and the top Iraqi delegate also earned a round of applause: They entered the hall together and kissed in a conciliatory gesture between countries that have been enemies since the 1991 Gulf War over Kuwait.

Iraq made conciliatory gestures toward Kuwait, the southern neighbor it invaded in 1990 to spark the Gulf War a year later. The Arab leaders welcomed an Iraqi pledge to respect Kuwaiti independence and security in order to avoid a repetition of the invasion.