Bethlehem, West Bank ? A Palestinian flag fluttered Wednesday in Manger Square as Palestinian police marched into Bethlehem, taking control of the ancient West Bank city after Israel withdrew under a U.S.-backed peace plan.

The second handover of territory in three days, and the passage of another day without serious security threats, raised hopes that 33 months of deadly violence may be winding down.

Israel’s departure from Bethlehem followed its withdrawal from much of Gaza and an upbeat summit meeting Tuesday between Israeli and Palestinian prime ministers in which they moved forward with the “road map” peace plan, a blueprint for establishing a Palestinian state by 2005.

Among the plan’s first steps are a halt to violence and a gradual Israeli withdrawal from Palestinian cities and towns.

However, in Gaza, Palestinians fired four anti-tank shells at an Israeli settlement, slightly wounding two Israelis, the military said, the first incident of its kind since the handover Monday.

Early today, troops killed a militant with the Al Aqsa Martyrs’ Brigades, which is linked to the ruling Fatah movement, and arrested another in the West Bank city of Qalqiliya. The army said one of the militants was killed when he tried to escape.

In Bethlehem, Palestinian police returned to bullet-ridden barracks. Other police stations and outposts were gone — destroyed in repeated Israeli airstrikes.

“We have no choice but to be hopeful so that we can continue,” one officer said, refusing to give his name. “There is something this time — international pressure, and more specifically American pressure.”

A Palestinian boy marches alongside Palestinian police officers in the West Bank town of Bethlehem. Israeli troops stopped patrolling the streets of Bethlehem and handed over security of the area to Palestinian Authority police, who moved back into the area Wednesday. Bethlehem is the second area Israel has relinquished under a U.S.-backed Mideast peace plan.