Hundreds of Israeli police officers were pelted with rocks by a band of ultra-nationalist Jewish settlers today, as officials moved in to forcibly dismantle an illegal encampment in the heart of a Palestinian city.

The dramatic confrontation took place at dawn, when more than 200 officers backed up by armed border guards began to remove extremists who had barricaded themselves in empty stalls in the middle of Hebron's former marketplace.

As police dragged the settlers out of their makeshift homes, the extremists hurled abuse at the Israeli officers, with one shouting through a loudspeaker from a rooftop: "Forces of expulsion, God will punish you," and "You will not be able to break us, we will return."

Dozens of extremists were believed to have set up home in the area, with two extended families being joined at the site by a number of ultra-nationalist supporters.

Five teenagers were arrested and 27 people were wounded in this morning's four-hour operation which came a day after Ehud Olmert, the Israeli Prime Minister, met Mahmoud Abbas, the Palestinian President, in the nearby West Bank city of Jericho, and vowed to discuss the structure of a future Palestinian state.

After the settlers were removed and taken back to Israel, the police moved in to destroy their temporary homes in an attempt to prevent any more families from setting up inside.

The evictions put an end to a standoff lasting several months between the ultra-nationalists - who believe in an extremist ideology that promotes settling in the whole of the biblical Land of Israel - and the Israeli Government and courts, which demanded that they leave the site.

After a court eviction notice was handed down last Sunday, some of the settlers caused outrage by setting fire to the entrance to a Palestinian school in Hebron’s old city, causing damage but no injuries. They had repeatedly refused demands that they evacuate.

"The building had to be evacuated based on a court decision that was made at the beginning of the week," Israeli police spokesman Micky Rosenfeld said.

However the settlers declared that they were unbowed by the action. "It’s a shame we have got to this point," Noam Arnon, a spokesman for the settlers, told the AFP news agency. "This is Jewish property and we promise to come back."

The operation finally took place this morning after 12 religious Israeli soldiers, including two officers, were jailed for refusing to obey orders to take part, citing ideological objections.

Aside from today's dispute, Israel maintains a number of permanent long-established settlements in the West Bank, which the Palestinians have demanded be dismantled.

One of the most controversial is in Hebron itself, and contains several hundred residents living around the Tomb of the Patriarchs - a site holy to both Jews and Muslims. Many Israeli MPs have complained that protecting settlements monopolises a significant chunk of the country's national budget.

In a separate development today, President Abbas attempted to stem criticism from the Palestinian street over his meetings with Mr Olmert, claiming that the lives of ordinary Palestinians would be improved.

Significantly, he claimed he had received assurances from Mr Olmert that Israel would approve as early as next week the removal of some of the hundreds of checkpoints, roadblocks and barriers that restrict Palestinian travel.

"Many issues which affect the Palestinians in their day-to-day lives will be resolved," Mr Abbas told the Voice of Palestine radio station.

Israel says travel restrictions on Palestinians stem from security concerns. Palestinians, however, say Israel is carrying out collective punishment in retaliation for security threats caused by extremists.

Over the past few weeks, Israel has renewed security cooperation with Mr Abbas’s Fatah-dominated security forces in the West Bank following the violent takeover of the Gaza Strip by Hamas Islamists in June.

Hamas, which refuses to recognise Israel's right to exist or renounce terrorism, is isolated by the international community.

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