Top cabinet ministers approved Tuesday a plan calling for European Union officials to inspect travelers entering the Gaza Strip from Egypt through the Rafah border crossing.

If the plan is realized, it will mark the first time Israel will allow the EU to play a major role in Israeli-Palestinian relations.

Meanwhile, security sources said Israeli and Palestinian negotiators made progress during a meeting Tuesday night on reopening the Rafah terminal.

One of the problems hampering Israeli-Palestinian talks over Rafah is a disagreement over how much authority the European inspectors would wield.

The cabinet decided that Israel wants the Europeans to have greater authority than observers and be able to intervene in dangerous security situations, while the Palestinians want more limited authority for the EU. Israel is also demanding that it receive information in real time from the border control authorities via cameras filming those who use the Rafah crossing, to which the Palestinians object. Nonetheless, Israel would not have control over who crosses the border.

The Palestinians rejected the cabinet decision on Tuesday, but Israeli security officials said Israel may reopen the Rafah crossing earlier than the target date, which isn't for another six months, in an effort to strengthen Palestinian Authority Chairman Mahmoud Abbas.

Nonetheless, military sources said the Egyptian preparedness along the Philadelphi route is far from complete; three senior wanted Palestinians from Gaza recently escaped to Sinai by bribing Egyptian patrols. The sources said arms smuggling was a continuing threat.

"The Palestinian leadership will not agree to operate Rafah under the conditions approved by the Israeli cabinet," said Palestinian Planning Minister Ghassan al-Khatib.

"This is an Israeli deception attempt aimed at preserving the stranglehold on the Gaza Strip indefinitely."

He also said European inspectors would not patrol the Rafah terminal unless the Palestinians, Israelis and Egyptians could agree on the matter.

Several other issues also remain unresolved. For instance, the Palestinians want to be able to export goods via the Rafah crossing, but the Israelis want all goods to go through the Kerem Shalom terminal, controlled by Israel.

A Palestinian official knowledgeable about the Rafah talks called the agreement "nothing but fraud and a circumvention of the Palestinian side."

He blamed Egypt as well as Israel for the problems, saying many aspects of the plan were opposed to Palestinian interests and that the Palestinians had not been asked for their opinions on the matter.

The Rafah plan is thought to lessen the danger Israel faces in reopening the Rafah crossing, because it calls for limiting the crossing to use by Palestinian residents. It is still unclear under which circumstances other nationals, such as diplomats or VIPs, will be allowed to cross. Other travelers will be compelled to use the Kerem Shalom crossing.

Meanwhile, the Israeli negotiation team, headed by Maj. Gen. (res.) Amos Gilad, held an additional round of talks Tuesday with the Palestinian team, led by top Palestinian negotiator Saeb Erekat, to discuss the details of an agreement on Rafah. Quartet envoy James Wolfensohn also participated.

A source close to the talks said Israel considers it important for Defense Minister Shaul Mofaz, who left for the United States last night, to be able to present the American administration with an agreement that would allow the Rafah terminal to be reopened. An additional meeting is planned for Wednesday.

The parties agreed Tuesday that the Palestinians and Egyptians would be responsible for the Rafah crossing.

The Palestinians suggested that rather than letting Israel see what goes on at the crossing via cameras and through a daily list of those who use the crossing, as Israel wants, several videos and lists will be handed over at once.

Foreign Minister Silvan Shalom said the European inspectors should be allowed to enforce the law.

"There is a tangible danger of smuggling at the border crossings," he said at a press conference with Italian Foreign Minister Gianfranco Fini. "Our objective is for the Europeans to have enforcement capabilities in the field, and not just a symbolic presence."

The EU has not yet discussed the requests. However, inspecting the Rafah terminal could pose a danger to the EU, which may make it think twice about agreeing to patrol the border even though Europe has long been trying to become more involved in the peace process.

European diplomatic officials told Haaretz that the EU has informed Israel and the Palestinians that it is demanding a time limit be placed on its activity in Rafah and that it will not commit to an unlimited patrol.

The EU is also calling on the Palestinians to provide any European inspectors with security arrangements to prevent attacks.

Fini, meanwhile, said the Rafah agreement must be as detailed as possible, saying that only then will it be possible to decide which forces will carry out the mission.

The EU does not have its own police force. He said the EU would examine the requests of both sides before making a decision, and that he thinks the EU should accept the responsibility because to do otherwise would be a loss to its foreign policy.

Vice Premier Shimon Peres' bureau will coordinate the negotiations with Europe.