RAMALLAH, West Bank ? Palestinian leader Yasser Arafat will keep his grip on security forces and place a handpicked confidant in the post of interior minister after winning a power struggle Saturday with his prime minister.

The agreement clears the way for the formation of a government in the coming days and the resumption of high-level talks with Israel, but frustrates American efforts to sideline Arafat.

Also Saturday, Israeli troops killed two Palestinians in violent street clashes and blew up a large explosives lab hidden in a West Bank refugee camp. In Gaza, soldiers killed two Palestinians in an off-limits zone near the fence with Israel.

Arafat and Prime Minister Ahmed Qureia met Saturday with officials from the ruling Fatah movement to finalize agreement over control of eight security branches and the makeup of a new Cabinet. With the arrangement, an intense power struggle and political limbo appeared close to an end.

“I hope we will finish forming (the Cabinet) in the next couple of days,” Arafat said.