The planned Israeli transfer of West Bank towns to Palestinian control has been postponed after the two sides failed to agree Sunday on the terms of the transfer. Both sides have agreed to meet again this week in a bid to resolve their differences.

After four hours of talks on Sunday, a Palestinian spokesman said there had been a setback to the planned transfer of four towns to Palestinian control over the next 10 days.

The spokesman for Palestinian Security Minister Mohammed Dahlan, said the problem lay in Israel's insistence that even after the handover, Israel would maintain roadblocks to control movement in and out of the towns.

Israeli officials confirmed that the two sides failed to reach agreement but pointed to other issues, including the supervision of wanted Palestinian militants in the cities that will be transferred to Palestinian control.

Israel is demanding a commitment from the Palestinian Authority that the wanted Palestinians be prevented from continuing to use the areas as bases to launch terror attacks.

Israel had announced it was ready to hand back control over Qalqilya and Jericho to the Palestinians as early as Monday. The transfer of Tulkarem and Ramallah, the seat of Palestinian government, were to follow next week.

A spokeswoman for the Israeli Army said that the meeting on Sunday had been "businesslike" and the two sides would soon hold more talks.

There were clear signs that the Palestinian Authority still expected the transfers to go ahead despite the failure to reach an agreement. On Sunday, Palestinian police officers in civilian clothing were reported to have been deployed in Qalqilya as part of preparations to resume responsibility for law and order.

Israeli troops moved into Palestinian towns across the West Bank last year following a campaign of Palestinian suicide bombings.

Israeli Prime Minister, Ariel Sharon, pledged that the soldiers would be withdrawn once the security situation had improved.