The agreement, which put to rest a threat by Mr. Abbas to resign, came as Israeli officials were stepping up their campaign to sideline Mr. Arafat, asserting that the peace effort could not succeed as long as he retained any authority.

Mr. Abbas made his threat on July 7, after Mr. Arafat and his allies in the Palestinian leadership attacked the prime minister's stewardship of negotiations. They accused him of failing to win substantial concessions from Israel in return for a decision by the main Palestinian factions to suspend violence. 

While that battle reflected a rivalry built into the two leaders' relationship, tonight's agreement demonstrated a countervailing political dynamic: each man needs the other, Palestinian politicians say. Mr. Abbas lacks Mr. Arafat's broad domestic support, while Mr. Arafat lacks Mr. Abbas's credibility with Israel and the United States.

"The disputes are over, and things are all right," Mr. Abbas told reporters tonight after meeting Mr. Arafat in his ruined compound in the West Bank city of Ramallah.

As the Palestinian leaders met, Ariel Sharon, the Israeli prime minister, was in London trying to persuade Prime Minister Tony Blair's government to cut all ties to Mr. Arafat. It declined to do so, Israeli officials said.

Israel accuses Mr. Arafat of undermining Mr. Abbas and his pursuit of a new American-backed peace plan, known as the road map. Mr. Arafat's associates say that he is simply unhappy with the way Mr. Abbas has handled negotiations, and that it is Israel that is undermining Mr. Abbas by not being more forthcoming.

Ahmed Qurei, who is the speaker of the Palestinian parliament and who helped mediate the dispute, said in a telephone interview, "We discussed openly and frankly all the issues." 

"There were no serious differences," he said. "But there was tension as a result of the situation on the ground and the Israeli practices."

Raanan Gissin, the spokesman for Mr. Sharon, said the agreement appeared intended to "ensure that no change in the position of Arafat's authority would occur." He added, "This is a very temporary, tenuous truce, that's all."

Under the terms of tonight's agreement, a negotiating committee of the Palestine Liberation Organization will give Mr. Abbas bargaining guidelines. Mr. Abbas and Mr. Arafat sit on that committee, as do several longtime associates of Mr. Arafat. 

Palestinian officials said the two men agreed to add a new member to the committee: Salam Fayyad, the Palestinian finance minister, whom the Bush administration has hailed as a leading reformer. It was not immediately clear if Mr. Fayyad had accepted the appointment.

His appointment was highly unusual, because he is not a member of any of the factions that make up the P.L.O.

In a similar compromise, Mr. Abbas agreed that a security committee would oversee the work of his minister for security, Muhammad Dahlan. Israel regards Mr. Dahlan as a formidable security officer, but Mr. Arafat had chafed at the level of authority Mr. Abbas had granted him. Now, Mr. Dahlan will sit on a committee with security appointees of Mr. Arafat, Palestinian officials said.

More broadly, the two leaders have bickered over the extent of Mr. Abbas's powers. Under international pressure, Mr. Arafat, the president of the governing Palestinian Authority, reluctantly appointed Mr. Abbas to the new office of prime minister. The Palestinian parliament confirmed him, vesting him with authority to form a government.

Mr. Arafat and Mr. Abbas agreed that they would refer any disputes over powers not spelled out in the law to a new committee of four men: Mr. Qurei; Saeb Erekat, a longtime negotiator and Arafat adviser; Akram Haniyeh, a political adviser to Mr. Arafat and editor of the newspaper Al Ayyam; and Ghassan Shaka, the mayor of Nablus, in the West Bank, and a member of executive committee of the P.L.O.

Mr. Erekat said that during the meeting, Mr. Abbas declared, "I fully support Arafat," and Mr. Arafat replied, "I fully support the government."

The Israelis have failed to persuade the other parties to the new peace plan — the Russians, the European Union and the United Nations — to adopt the American and Israeli policy of isolating Mr. Arafat. 

Mr. Gissin described the dispute with the British and other Europeans as a matter of tactics, not goals. "The Europeans say, `We can affect Arafat if we embrace him, continue to talk to him, ease him out of power,' " he said by telephone from London. "We are very skeptical about it, to say the least."

In a separate development tonight, Israeli officials acknowledged that an Irish citizen arrested in the West Bank on Saturday may not be a bombmaker from the Irish Republic Army on a mission to train Palestinian terrorists, as they had said. The BBC reported that he was instead an Irish journalist and pro-Palestinian activist.

The man has been interrogated by the Shin Bet security service. A senior Israeli official said that although the Irishman might not be the bombmaker, he "was involved with terrorist organizations in the territories."