Israeli troops have pulled out of the West Bank town of Bethlehem to allow Christmas celebrations in the city considered by Christians as the birthplace of Jesus.

The Israeli military said its troops have withdrawn from the center of Bethlehem to positions on the outskirts of town.

They said none of their forces will be in the city during Christmas week as long as there are no indications of attacks being planned against Israeli citizens.

The pullout came a day after Palestinian leader Yasser Arafat criticized Israel's presence in Bethlehem saying it was unfair that the whole world can celebrate Christmas in freedom while the Palestinian people and the city of Bethlehem are banned from doing so.

Israel barred Mr. Arafat from travelling to Bethlehem to attend Christmas events for the second year running. He had attended Christmas Eve mass there every year since the city was handed over to Palestinian control in 1995.

Israeli forces most recently re-occupied the city last month following a suicide bombing in Israel. They had deployed to Manger Square with armored vehicles parked just a dozen meters from the Church of the Nativity the site considered the birthplace of Jesus.

Israel media report that Israeli Arabs and West Bank Palestinians with special permits will be allowed to attend Christmas services in Bethlehem but Christmas Eve festivities in the West Bank city on Tuesday are expected to be muted.

Israel reoccupied every major Palestinian city and town in the West Bank, except for Jericho, in June following a wave of Palestinian suicide bombings which killed scores of Israelis.