The Israeli Foreign Minister, Shimon Peres, and the chairman of the Palestine Liberation Organisation, Yasser Arafat, said an agreement had been initialled. "But we still have some points left to sub-committees to continue,'' Mr Arafat said.
Details were to be released shortly, but officials said Hebron, the only town with Jewish settlers living in it, was one of the issues to be fully worked out by the sub-committees.
The two men had returned to the negotiating table last night in the Egyptian resort of Taba, with Israeli sources predicting a deal on most, if not all, of the outstanding issues. The announcement was made shortly before 3am local time.
They had met earlier for more than five hours, then discussed texts with their respective military and legal teams.
The Palestinian spokesman, Marwan Kanafani, said the biggest obstacle remained Israel's reluctance to evacuate its troops from Hebron, where 450 Jewish settlers live in the midst of more than 100,000 Palestinians. Mr Kanafani insisted that Hebron had to be treated like any other West Bank town: "One hundred thousand Palestinians cannot be held hostage to 450 Jews."
The Palestinians were making withdrawal of Israeli troops from the main population centres a condition for holding elections to their ruling council. Israel has agreed to leave six other Arab towns, but said it must retain a military presence in Hebron to protect the settlers.
Mr Peres was more hopeful. "We have agreed on most of the issues," he said as he re-entered the negotiating room on the tenth floor of the Hilton hotel, "but once you start writing things down, you reopen the story.''
It had earlier been reported that Israel had shown flexibility over land and water, which matter most to the Palestinians, in return for Palestinian flexibility on security for Israel.
Israel radio said the US Secretary of State, Warren Christopher, talked by telephone with Mr Peres and Mr Arafat yesterday, and agreed the setting up of a joint US-Israeli-Palestinian group to recommend an equitable division of water resources.
Robert Fisk, page 15Reuse content