Palestinian Prime Minister Ahmed Qureia says he has he has formed a new government and will present it to parliament next week for approval.
Mr. Qureia has won the backing of Mr. Arafat to form a new cabinet by conceding power over the security forces to the Palestinian president.
Mr. Qureia had wanted the Palestinian security commander, Nasser Yousef, to become interior minister with control over the various police forces. But Mr. Yousef has now been excluded from the cabinet lineup in a move to appease Mr. Arafat, who has succeeded in securing the post for one of his strongest loyalists, Hakam Balawi.
Mr. Balawi will reportedly have responsibility for some of the security forces, while others will be overseen by a new national security council headed by Mr. Arafat.
Mr. Qureia said the cabinet will be subjected to a vote of confidence by the Palestinian Legislative Council on Wednesday.
He has said that once the government is approved he is willing to renew discussions on the international Roadmap to Peace plan for the Middle East. The plan calls for the establishment of an independent Palestinian state by 2005.
Israel's prime minister, Ariel Sharon, has expressed his commitment for implementing the Roadmap on condition that the Palestinian Authority disarm and dismantle Palestinian terror groups.
Mr. Sharon has also said he is willing to meet Mr. Qureia, but not Mr. Arafat, who the Israeli cabinet says should be removed from the Palestinian leadership.
Israeli officials, who accuse Mr. Arafat of orchestrating much of the violence in the region, expressed disappointment that Mr. Qureia had conceded control over the security forces to the Palestinian president. The officials said the Palestinian cabinet deal extends the term of what they describe as Mr. Arafat's cartel of terror.
