After a day of conflicting signs, the office of Ehud Barak, the Israeli Prime Minister, said that it was sending an advance security team to the Red Sea resort town of Sharm el Sheikh to prepare the way for the signing ceremony.
The critical breakthrough came when the Palestinian negotiators climbed down over their demand that Israel release 400 Palestinian security prisoners, which Mr Barak had refused to do. Haim Ramon, an Israeli cabinet minister, said the Palestinians had "at last accepted our position that only 350 would go free". A Palestinian official confirmed at midday that "the issue of the prisoners is no longer an obstacle".
The agreement on prisoners opens the way for the signing of a modified version of the accord negotiated by Benjamin Netanyahu, the previous Israeli prime minister, at the Wye Plantation in Maryland last year. Mr Netanyahu never implemented the deal, but divisions over the agreement led to the fall of his government.
Mr Barak has now agreed to withdraw Israeli troops from 11 per cent of the West Bank, release 350 prisoners, open two safe passages between Gaza and the West Bank and allow construction of a port at Gaza.
The final agreement on prisoners came after a day ofnegotiating by Madeleine Albright, the US Secretary of State. After waiting in vain in Alexandria on Thursday for Mr Arafat and Mr Barak to appear at "a festive signing ceremony", she flew to Israel for a three hour overnight meeting with the Israeli Prime Minister.
"I've never known anything like it," said one diplomat in Tel Aviv. "The Americans were adamant that they would not be drawn into negotiations between Israel and the Palestinians but they have done just that. Albright has been mediating since she got off her plane in Alexandria." The pace of negotiations yesterday was such that at one point the Israeli Foreign Ministry was taking reporters to a meeting between Mrs Albright and Mr Barak which the Prime Minister's office insisted was not taking place. Despite the breakthrough over prisoners Mrs Albright said: "We are hopeful but to use an American phrase, `it ain't over till its over'."
Mr Arafat, having first said a deal was imminent, added later: "There are many difficulties facing us and the American and Egyptian mediators." He will face criticism among Palestinians for not insisting on the release of 400 prisoners. His failure to win their freedom during the Wye talks last year led to an attack on the house of one of his chief negotiators. He will be pleased, however, that by holding fast for so long over the prisoners he forced the Americans to mediate.
Both Mr Arafat and Mr Barak also needed to show their own publics that they had fought up to the last minute on the prisoner issue. Palestinians see their prisoners as martyrs, while Israelis generally resent the releases. The Palestinian leader's last minute hesitation over signing the accord revolves around a clause which might prevent him declaring a Palestinian state next year.
Mr Arafat has also been nervous that Israel and the US would give priority over the Palestinians to negotiations with Syria over an Israeli withdrawal from the Golan Heights and Lebanon. This was meant to be the main focus of Ms Albright's Middle East visit.
Ms Albright is to visit Damascus today for talks with the Syrian President Hafez al-Assad in a bid to revive negotiations with Israel. A senior Syrian official said: "The US should persuade Israel to agree to the resumption of the talks [with Syria] from the point where they were broken off in February, 1996."
Israel and Syria are in dispute over what was agreed during past negotiations, with the Syrians insisting that they were promised the whole of the Golan Heights as it was defined before Israel captured the plateau in the 1967 war. A Syrian official said: "The issue of the land is already settled. Syria will not cede an inch of its lands and will never accept capitulation under any circumstances. It will not rush for a settlement if it is not a just and comprehensive one."Reuse content