JERUSALEM -- A Palestinian gunman broke into a Jewish settlement in the West Bank on Friday and opened fire in a home where a family was marking the Jewish New Year, killing a man and a toddler and shattering Israel's efforts to maintain calm over the holiday.

The attacker was shot and killed by soldiers guarding the settlement, said Capt. Jacob Dallal, an Israeli army spokesman. Two other Israelis also were wounded in the attack on Negahot, near the West Bank city of Hebron, he said.

Israel has accused Palestinian leader Yasser Arafat of encouraging terror attacks, and Israeli Prime Minister Ariel Sharon said in an interview published Friday he was determined to "remove" Arafat one day, even at the risk of harming him.

There was no immediate claim of responsibility for Friday's attack. In the past three years of fighting, Palestinians have repeatedly attacked Jewish settlements in the West Bank and Gaza Strip.

The attack began about 9 p.m. when a Palestinian armed with an M-16 rifle infiltrated the isolated settlement, Dallal said. The man knocked on the door of one house and fatally shot a guest, a 30-year-old man, who answered the door, he said.

A young girl also was shot and her parents were slightly wounded, he said. The girl's age was not given.

"It's no coincidence that this attack was planned for this hour, the night of the Jewish New Year," Dallal said. "Clearly, the people behind the attack knew they could find families at home during the holiday dinner."

Several attacks have been carried out during Jewish holidays in the past three years, most notably the March 27, 2002, suicide bombing at the Park Hotel in the northern coastal town of Netanya that killed 29 people participating in the ritual Passover meal.

In an effort to prevent possible attacks over the holiday, the Israeli military tightened a Palestinian travel ban in the West Bank and Gaza Strip. All Palestinians were banned from entering Israel, and Palestinians in most of the West Bank were barred from leaving their communities.

Thousands of police were sent to guard synagogues, parks and intersections in Israel.

Israel has received more than 40 warnings about possible terror attacks over the two-day New Year's holiday, which began Friday evening, government spokesman Avi Pazner said.

The fate of Arafat, who is holed up in his headquarters in the West Bank city of Ramallah, was thrown into question Sept. 11, when Israel's security Cabinet called for his removal.

Sharon told the Israeli daily Yediot Ahronot that the security Cabinet's decision canceled a promise he made to President Bush several years ago not to physically harm the Palestinian leader.

"Bush asked me not to harm him physically and I promised ... The Cabinet decision is a kind of cancellation of the promise," Sharon said. "You have to keep in mind that it is very difficult to ensure that he (Arafat) won't be harmed if we seize him."

Other top Israeli officials have said the term "removal" could mean both expulsion and assassination, but Sharon's remarks seemed to suggest the first choice is to oust Arafat.

Chief Palestinian negotiator Saeb Erekat said Sharon's comments proved Israel was trying to kill Arafat and was not committed to implementing the U.S.-backed "road map" peace plan, which envisions the creation of a Palestinian state by 2005.

"It's no longer a matter of whether they will kill President Arafat, it's a matter of when," Erekat said.

Meanwhile, the incoming Palestinian prime minister, Ahmed Qureia, said he has concluded consultations on his new Cabinet and will present it to parliament for approval within the coming days.

Leaders of the ruling Fatah party will meet Saturday to discuss and approve the new ministers, Palestinian officials said. At least two Cabinet members -- Foreign Minister Nabil Shaath and Finance Minister Salam Fayad -- will keep their jobs, the officials said.

Qureia has given Fatah -- and thereby Arafat -- considerable say in forming the Cabinet. Qureia has said that, unlike predecessor Mahmoud Abbas, he will not challenge Arafat.

Israel has said it would not deal with an Arafat-controlled Cabinet. However, Sharon has not ruled out doing business with Qureia, whom he has met repeatedly in recent years.

In the interview with Yediot, Sharon said he would judge him on his deeds, not his statements. Israel wants the Palestinians to dismantle Palestinian militant groups, as required by the peace plan, but Qureia has suggested he will not use force to do so.

Sharon also indicated that prisoners held in Europe could be part of a German-brokered prisoner swap between Israel and the Iranian-backed Lebanese guerrilla group Hezbollah.

Israeli newspapers reported Friday that several Iranian and Lebanese prisoners held in England and Germany might be traded for information on missing Israeli airman Ron Arad, who Israel says is held by Iran after being shot down over Lebanon in 1986.

As part of the emerging deal, Israel would free several hundred Arab prisoners, many of them Palestinians, in exchange for Israeli businessman Elhanan Tannenbaum and the bodies of three soldiers kidnapped by Hezbollah in 2000.

Also Friday, Izzat Abu Sweireh, 68, died in Gaza of injuries he sustained last week when his son, Jihan, a Hamas member, was killed by Israel. In the West Bank, Ibrahim Khalil Abu Alrob, 21, also died from the wounds he sustained last week during violence.