The crisis went into its second night yesterday, with about 3,000 students and staff inside the campus of al-Najah University in Nablus surrounded by Israeli troops demanding to search for armed Palestinian activists.
'We are checking the situation,' Mr Rabin said on Israel television. 'The chief of staff was there and so were others and tomorrow we will make a decision.' Palestinian leaders announced yesterday they would go on a hunger strike this morning in solidarity with the besieged Arabs and the United States said it had been in touch with both sides and urged a peaceful solution to the confrontation.
Saeb Erakat, a member of the Palestinian delegation to Middle East peace talks, said those inside the university had run out of food.
'The heads of Palestinian organisations met at the Red Crescent office and decided to go on a hunger strike,' he said.
The siege began on Tuesday when the army said it believed there were armed men on the campus during student elections. The students refused to submit to searches and hundreds of troops then sealed off the university.
Mr Rabin, who took office three days ago, criticised the previous Israeli government for allowing the crisis to develop by not being prepared. 'Whoever decided on these elections had to prepare to check those entering, not those leaving,' he said.
Richard Boucher, a spokesman for the US State Department, said: 'Our embassy and consulate in Jerusalem have been in touch with both sides, various parties out there. We've been urging people to resolve this peacefully and we're urging them to exercise maximum restraint,' he said.
James Baker, the US Secretary of State, is due in Israel on Sunday for his first talks with Mr Rabin since his victory last month.