Arafat retains exclusive control over all Palestinian Authority security forces, the Jerusalem Post reported. Prime Minister Ahmed Qurei backtracked from his demand to appoint an interior minister with authority over the security forces.
Qurei had threatened to quit several times over the issue in the past few weeks.
Senior Israeli government sources said the development has not lessened Prime Minister Ariel Sharon's willingness to meet with Qurei.
The Palestinian National Security Council, dominated by Arafat loyalists, has the final decision on security matters.
Now the Palestinian interior minister will likely be Hakam Balawi, Qurei said, and security matters will remain in the hands of the Security Council.