He is under pressure from the US not to declare Palestinian independence and he does not want to do anything to help Benjamin Netanyahu, the Israeli prime minister, to win re-election on 4 May.
Mr Arafat told some 100 members of the Central Council of the Palestine Liberation Organisation meeting in his Gaza office that Palestinians have the right to declare independence, but he did not name the day when they would.
Earlier, Mr Arafat received a letter from President Bill Clinton stating that the US wanted to wrap up talks on issues such as Jerusalem, refugees, settlements and borders within a year. President Clinton said the Palestinians had the right to be "a free people on their own land" and he condemned the expansion of Israeli settlements on the West Bank.
Such American declarations, which seldom bring practical benefits to Palestinians, have clearly begun to pall with some Palestinian leaders. Standing outside Mr Arafat's heavily guarded office, Marwan Barghouti, the leader on the West Bank of Fatah, the main Palestinian political movement, said Palestinians had already "signed several agreements with Israel in the White House, but they have never been implemented".
Mr Barghouti said he favoured declaring a Palestinian state on 4 May, at the end of the five-year interim period of the Oslo accords. He said Palestinians were frustrated. A small crowd gathered behind steel barriers some distance from Mr Arafat's office, shouting: "Yes to the state of the free on the fourth of May."
Ahmed Yassin, leader of the Islamic movement Hamas, and three of his senior lieutenants attended the closed session of the Central Council as observers. They said all negotiations with Israel should be broken off.
In recent months Mr Arafat has relied almost wholly on international pressure as a lever on Mr Netanyahu, but without demonstrable effect.
Nabil Shaath, one of his senior aides, said that in many ways the Palestinians already had an independent state in Gaza, but "it is a state under siege".
This siege can be lifted only by agreement with Israel and not a unilateral declaration of independence by the Palestinians, which would not change the facts on the ground. In the past six months Israel has built 12 new settlements on the West Bank, despite expressions of American displeasure.
Workers in Gaza can get into Israel only after stringent security checks. The head of the Israel prison at Erez, one of the main checkpoints, was suspended this week after an Israeli army investigation, started by a soldier's complaint, revealed that Palestinian workers in detention were beaten, humiliated and denied medical attention.
The Central Council meeting in Gaza is likely to adjourn until after the Israeli elections, which Mr Arafat hopes Mr Netanyahu loses. This also enables the Palestinian leader to use the threat of a declaration of independence as a lever on the US to become involved in negotiations with Israel.
Mr Netanyahu claims his toughness prevents the Palestinians claiming statehood. He said yesterday that Mr Arafat "knows that as long as I am prime minister of Israel, such a state, with Jerusalem as its capital, will not be established".
A central theme of the Israeli prime minister's election campaign is that he has stopped suicide bomb attacks, made Israelis feel safer, but has made few concessions to the Palestinians. He had threatened to formally annex parts of the West Bank if the Palestinians declare an independent state.
The Israeli opposition One Israel party has accused Mr Netanyahu of brokering "a honeymoon" in relations between Mr Arafat and the US. But the Israeli leader may calculate that with a US presidential election he has little to fear with pressure from Washington.
There were momentary fears that the bombers had returned yesterday when a car blew up in Rishon LeZion outside Tel Aviv yesterday, killing a child and injuring three people. Police suspect the motive was criminal, not political.