"A country has the right to build a fence on its own territory but we believe the route of this fence is contrary to international law," Solana said during a joint news conference with Israeli Foreign Minister Silvan Shalom.
Also Thursday, a legislator said that, under growing pressure, Yasser Arafat has agreed to grant his prime minister full authority over the security forces.
Imad Fallouji, a member of the Palestinian Legislative Council, said after his meeting that "Arafat expressed his readiness to give (the prime minister) full authority to reshuffle his cabinet in the way that he sees fit and give the government full ... authority over the internal security services."
Arafat has made similar assurances in the past.
The long-time Palestinian leader is in the most tenuous political position since establishing his Palestinian Authority in 1994. His prime minister, Ahmed Qureia, submitted his resignation Saturday following a wave of kidnappings and mass protests.
Arafat refused to accept the resignation, but Qureia insists he is heading a caretaker government. The Palestinian parliament passed a resolution Wednesday demanding the veteran leader form a new government equipped with powers to provide law and order.
Meanwhile, Israel, Egypt and the U.S. are trying to organize a Middle East peace conference to coordinate the planned Israeli withdrawal from the Gaza Strip, reports CBS News Correspondent Robert Berger. The conference might take place in November and there are two possible venues — New York or Cairo. The main sticking point is that Egypt wants the Palestinian Authority to participate and Israel does not. Israel says it won't negotiate with the Palestinians until they begin to fight terror.
In another development Thursday, security officials said soldiers had thwarted a suicide bombing meant for Haifa when they stopped a Palestinian taxi and forcing its occupants to flee.
Acting on intelligence tips, troops set up surprise roadblocks near Nablus on the West Bank to stop and inspect all vehicles. As the taxi approached one of the roadblocks, it suddenly turned and tried to flee the area.
A suicide bomber's vest was found inside the vehicle, although the two Palestinians riding in it escaped.
Solana had photo opportunities and meetings with Israeli government officials canceled Thursday.
An Israeli official, speaking on condition of anonymity, said Israel had decided to give Solana an especially "difficult and cold reception."
Solana's comments came just two days after the European Union infuriated Israeli leaders by supporting a U.N. General Assembly resolution calling on Israel to tear down the barrier in compliance with a world court ruling.
"The government and people of Israel are deeply disappointed by Europe's decision to vote with the Palestinians and against the fence," Shalom said.
"The EU should be engaged in promoting Palestinian reform in Gaza and Ramallah, not Palestinian manipulation in the U.N.," Shalom said, adding that Europe's vote "encourages the Palestinians to continue their evasion of responsibility" on fighting terror.
Israel has long accused the E.U. of being unbalanced and has pushed Europe to the sidelines of Israeli-Palestinian peacemaking efforts.
Earlier this month, Prime Minister Ariel Sharon refused to meet with the Quartet — made up of envoys from the United States, Europe, the United Nations and Russia. Sharon's spokesman said at the time that Israel would not discuss peacemaking or security issues with Europe.
Solana and Shalom met for an hour before the news conference amid an atmosphere of rising tensions between Israel and Europe. Israeli media reported that Israel blamed France for persuading EU countries to support the resolution.
Israeli-French relations took a hit earlier this week when Sharon urged Jews in France to emigrate to Israel to escape a wave of anti-Semitism. French President Jacques Chirac said Sharon would not be welcome in Paris until he explained his comments.
Israel says the string of fences, walls and barbed wire that will eventually stretch 425 miles keeps out suicide bombers. Palestinians say the construction of the barrier is a land grab since it cuts into the West Bank at several points.
"The fence goes through occupied territories and from the very beginning we have been against that, it's no surprise," Solana said.
"The security of Israel and the protecting of the Israeli people is something we have always supported and we'll continue to support," Solana added.
Israel's Foreign Ministry summoned European ambassadors for consultations Wednesday to express Israel's displeasure over the European position on the barrier.
The European Union vote shows it is "willing to pay the price of the basic principles of justice and morality and raises doubts about the European Union's ability to contribute constructively to the advance of the peace process," the ministry said in a statement.
Shalom said Israel had hoped the meetings with Solana would focus on improving Israeli-European relations but were redirected because of the U.N. vote.
"This visit is now taking place in the shadow of Europe's vote ... Much of our time today was spent in a frank discussion of the issue," Shalom said.
The United Nations General Assembly overwhelmingly passed a resolution Tuesday calling on Israel to take down the barrier and comply with a nonbinding ruling issued earlier this month by the International Court of Justice in The Hague, Netherlands.
Israel has refused to comply to the world court ruling and the U.N. resolution. Neither of them are legally binding, but both have symbolic significance.
Meanwhile, a new report accuses Israel of expanding settlements in violation of a commitment to the U.S. Israel's dovish Peace Now movement says there are more than 3,000 new housing units in West Bank and Gaza settlements, in defiance of the "road map" peace plan.