The siege had triggered a wave of protest attacks and abductions directed against foreigners across Gaza and the West Bank and there were heavy exchanges of fire outside the Jericho jail which claimed the lives of two Palestinians.
Militants stoned and set fire to the British Council building in Gaza as foreigners began to flee from the Strip last night to avoid further reprisals.
The prisoners, among them Ahmed Saadat, leader of the Popular Front for the Liberation of Palestine (PFLP), the faction behind the murder of Israel's Tourism minister Rehavam Ze'evi, walked out of the jail shortly after nightfall after a day of high tension in which Israeli forces used repeated artillery and machine-gun fire to reinforce their threat to kill the men if they failed to turn themselves in.
During the day, Palestinian gunmen seized a number of foreigners from hotels in Gaza. Palestinian security officials said they included a Swiss Red Cross worker, two Australian teachers, two French medical workers and three journalists - two French and a South Korean.
The Australian teachers were subsequently released. A British diplomat said there were no reports of UK nationals being seized but they were trying to bring two Britons back into Israel, one from Gaza, one from the West Bank.
Gunmen in Jenin in the West Bank kidnapped Douglas Johnson, a professor of English at the American University, and initially threatened to kill him if Israel harmed Ahmed Saadat. Mr Johnson, who was later released, said he sympathised with Palestinian anger over the Israeli operation in Jericho.
In the Commons, Jack Straw, the Foreign Secretary, denied Palestinian charges of complicity with Israel over the abandonment of the joint UK-US monitoring mission, amid accusations from Palestinian leaders that Israel had acted to bolster its standing in elections two weeks away.
A statement from the office of the Palestinian Authority President, Mahmoud Abbas, called for a halt to attacks on foreign cultural centres but said: "The American and British observers bear full responsibility for their withdrawal from Jericho prison without the knowledge of the PA."
The British Government insisted it had repeatedly - and fruitlessly - raised with the Palestinian Authority violations of the 2002 agreement under which Saadat and other prisoners were held under international supervision. Mr Straw published a joint letter sent by the US and UK consul generals to President Abbas on 8 March in which they warned that the security monitors would be withdrawn unless their safety was protected.
The Israeli Army had earlier raked the prison with gunfire after cordoning off the area. It used bulldozers to start destroying the outer walls before firing tank shells and at least one air-launched missile in a show of military strength.
A plume of grey smoke rose from the vicinity of the prison in the central Palestinian Authority building in Jericho and the sound of heavy artillery could be heard at intervals before the prisoners and other Palestinian personnel left last night, hands raised above their heads.
The bulk of employees, guards and other prisoners - totalling 182 - had left much earlier in the hours after the army operation began, most stripped to their underwear on the orders of Israeli troops. Israeli military sources said 26 Palestinians had been injured during exchanges of fire with those inside the jail.
During the siege, Saadat, who was transferred to the jail in 2002, told the Arab satellite channel Al-Jazeera: "We are not going to surrender. We are going to face our destiny with courage."
A senior army colonel said his troops had used megaphones to try to persuade a hard core of about 30 Palestinians - including the six wanted prisoners - to surrender alive. "This is not a negotiation," he said, adding it had been made clear to the men that "if you don't go out you will be killed." Troops surrounding the area were reportedly attacked by petrol bombs, stones and occasional gunfire.
While acknowledging that Israeli forces had long been prepared for the possible seizure of prisoners, the officer claimed the first he knew of it was when he noticed the three British monitors on their way out through a Jericho checkpoint yesterday morning.
A British diplomat said the UK had been pressing the Palestinian Authority for many months over violations of the requirements to keep prisoners in seclusion as well as concerns over the security of the monitors.
The infractions included the use of mobile phones by prisoners, the frequent visits made and the relative freedom with which they were allowed to leave the prison to pray or for medical care.
Gideon Meir, the deputy general of the Israeli foreign ministry, said that after the breakdown of negotiations held by the British and US with the PA it had no choice but do "what any democracy would have done" and take custody of the prisoners.
Target of Israel's raid
* Ahmed Saadat, 52, took over the leadership of the radical Popular Front for the Liberation of Palestine in October 2001, just two months after the assassination of his predecessor by Israel. Shortly afterwards, the PFLP murdered the Israeli Tourism minister, Rehavam Ze'evi. Unlike previous PFLP leaders, Saadat, a veteran of the first Palestinian intifada, did not live outside the occupied territories. After being forced to leave his air-conditioned cell in Jericho, he now faces more time in an Israeli jail, having already spent 10 years in prison before the killing of the Israeli minister.