In the West Bank city of Ramallah, Arafat met with his prime minister, Ahmed Qureia, to discuss the political crisis that erupted over continuing violence in Gaza and Qureia's attempt to resign as head of the Palestinian government.
"I totally reject your resignation and consider it nonexistent," Arafat told Qureia at a meeting Sunday, according to Cabinet minister Saeb Erekat. Qureia told his Cabinet on Saturday he was firm in his decision to quit.
The internal Palestinian unrest was the most serious in more than a year. In 2003, protests against corruption forced Arafat to promise reforms and appoint a new government, led by Mahmoud Abbas. He resigned after only four months.
Dozens of militants belonging to an extreme offshoot of Arafat's Fatah movement stormed an office building in the southern Gaza city of Khan Younis shortly after midnight to protest Arafat's appointment of his cousin, Moussa Arafat, as chief of security.
One security guard was wounded in a gun battle with the militants, who seized control of the building, stole weapons, and burned two offices and several cars parked nearby, witnesses and officials said.
Moussa Arafat's appointment was part of the Palestinian leader's reforms to his security forces, as demanded in the "road map" peace plan sponsored by the United States and supported by Egypt.
However, members of Arafat's own Fatah movement were infuriated, accusing Moussa Arafat of symbolizing the corruption and cronyism of the Palestinian Authority.
Dissent also spread to the security forces when navy chief Gomma Ghali, a strong Arafat supporter, handed in his resignation in protest over the appointment. His resignation, and those of two other senior security officers on Friday, have not been accepted, however.
Despite the protests, Moussa Arafat took control of the security forces at a handover ceremony in Gaza City on Sunday, saying he was prepared to fight all "potential enemies."
"I take my orders from His Excellency President Arafat. The one who appointed me is the only one who can ask me to quit my job," the new security chief said.
Moussa Arafat — previously the head of the Palestinian intelligence services — is known as a fierce commander, and completely loyal to Yasser Arafat. He was among the founders of Fatah in 1965.
In 1996, during a mass round up of Hamas and Islamic Jihad militants, Moussa Arafat shaved the heads and beards of the men he imprisoned to humiliate them. Human rights groups accused him of torture.
Dissatisfaction with Arafat's reforms spread throughout the Palestinian territories, though violence was confined to the Gaza Strip.
"Arafat now is at a crossroads. Either he makes a revolution inside his authority or the Palestinian people will make a revolution against him," said Ahmed Jamous, a student at Ramallah's Bir Zeit University.
"The people want elections and good government, not to be ruled by a group of corrupt thieves."
In Gaza late Saturday, about 2,000 protesters — many of them armed — marched to the Palestinian Legislative Council building.
"There is a consensus in the Palestinian nation and not just in Gaza that what is happening now can't continue," Soufian Abu Zaida, a Fatah leader in Gaza told Israel Radio.
Qureia updated Arafat on Saturday's stormy Cabinet session, in which ministers raged over the reforms and demanded the prime minister and his Cabinet be given more authority, said Cabinet ministers, who spoke on condition of anonymity. The Cabinet will meet again Monday.
Qureia, who has been in the post for 10 months, has been unable to carry out deep reforms in the Palestinian Authority to get rid of corruption because Arafat has balked at all attempts to relinquish authority.
The Gaza turmoil came against the background of Israeli Prime Minister Ariel Sharon's plan to withdraw from Gaza next year, intensifying a struggle for power and influence among the various Palestinian factions.
Sharon began talks on Sunday with opposition Labor Party leader Shimon Peres to rebuild his coalition government with parties that will support the Gaza pullout.
Also Sunday, the Israeli Cabinet extended for six months a rule forbidding Palestinians who marry Israelis from living in Israel. Human rights groups have criticized the law.
Arabs make up about 20 percent of the country's population, and many Israelis are concerned about their growing numbers.