Two Palestinians were killed in an Israeli air strike on Gaza City yesterday - one a senior member of a Palestinian group suspected of planning to abduct Israelis in Sinai, defense officials said.

In another development, the Palestinian Authority in the West Bank said it had caught a group planning to assassinate Nablus' governor and carry out a terror attack in Jerusalem.

Islam Yassin, a member of the Army of Islam, and his brother Mohammed were driving in their car in the city center when Israeli planes fired missiles at the vehicle. They were both killed.

Israeli defense officials confirmed that the attack was a coordinated operation by the Shin Bet security service and the Israel Defense Forces targeting Yassin.

He is seen as the top aide of the Army of Islam's commander, Mumtaz Durmush.

The organization is a radical Islamic group linked to Al-Qaida.

The Army of Islam was reportedly involved in the abduction of Gilad Shalit in 2006, although the group is no longer holding the Israeli soldier.

The organization was also involved in firing rockets at Israel and abducting BBC correspondent Alan Johnston.

An Israeli air-to-ground missile in Gaza City two weeks ago killed another senior member of the group, Mohammed Namnam, who was also considered a close associate of Durmush.

Namnam was suspected of involvement in plans to abduct Israelis and fire rockets at Eilat and Aqaba from Sinai. He was killed when his car exploded near the Hamas police building in Gaza City.

The PA security forces said they had arrested Hamas militants suspected of planning to abduct settlers and carry out a terror attack in Jerusalem, the Palestinian news agency Ma'an reported yesterday.

Ma'an said the cell was in direct contact with Hamas' leadership in the Gaza Strip. The cell also had plans to assassinate the governor of Nablus, Jibran Al-Bakhri.

Ma'an also reported that the cell had a vehicle filled with explosives. This report has not been confirmed, however.

A senior Palestinian source confirmed to Haaretz that the members of the cell had been arrested.

A few weeks ago the defense establishment let the Palestinian security forces act in Nablus throughout the day, even after midnight, Israeli sources said. Until then Israel forbade the Nablus security forces to act between midnight and 5 A.M.

Nablus is now the seventh West Bank city where Palestinian security forces may act at any hour of the day or night.

Israel recently pardoned 70 more people on its wanted list throughout the West Bank after the Palestinian authorities had fulfilled the pardon agreement with Israel by disarming wanted men and preventing them from carrying out terror activity.