A group of 100 masked militants stormed the home of Gaza's former security chief before dawn today, dragged him out in his pyjamas and killed him in the street in a burst of gunfire.

The murder of Moussa Arafat, a cousin of the late Yassir Arafat, was being seen as the most brazen challenge yet to the authority of Mahmoud Abbas, the Palestinian President, just days before the scheduled Israeli handover of Gaza to Palestinian rule.

Arafat, 65, was killed after a 30-minute gunbattle between the assailants and dozens of his bodyguards. The fighting with rocket-propelled grenades and assault rifles raged just a block from the headquarters of the Palestinian security service. Mr Arafat’s oldest son, Manhal, was kidnapped by the gunmen.

The Popular Resistance Committees (PRC), a violent group made up largely of former members of Abbas’ Fatah movement, later claimed responsibility. The group said that it killed Arafat to punish him for alleged corruption after the Palestinian security forces had taken no action against him.

"We have implemented God’s law," Mohammed Abdel Al, a PRC spokesman, told the Associated Press.

Mr Abbas said that he would track down the killers - a pledge immediately put to the test by the bold claim of responsibility. Mr Abbas has said that he will bring bring Fatah fighters under the control of his security forces within three weeks.

The killing heightened concerns that Mr Abbas and his weak security forces will not be able to restore order in the increasing lawless coastal strip where armed gangs control the streets.

Palestinian officials said they viewed the killing as an attack on the government. Mr Abbas convened his top security officials and Palestinian security forces were put on high alert.

While the PRC is made up mostly of former Fatah members, it also includes militants from the Hamas and Islamic Jihad groups. It has taken responsibility for numerous deadly attacks on Israelis.

Members of the group were also arrested by Palestinian police for alleged connection to a bombing against an American diplomatic convoy in October 2003 that killed three Americans. Some were later released for lack of evidence, and others were freed from Gaza’s central jail by fellow militants.

Arafat’s killing came just hours after Palestinian security forces were unable to contain dozens of rock-throwing youths who charged toward abandoned Israeli settlements and climbed on an Israeli tank. A Palestinian teenager was killed by Israeli troops firing to keep back the crowd.

In light of the chaos, the Israeli military sought permission to pull its last soldiers out of Gaza before the September 15 target date, Israeli security officials said. Ariel Sharon, the Israeli Prime Minister, and senior Cabinet ministers were to consider the issue in a meeting later today.

Mr Abbas fired Arafat, who had many enemies and was the target of frequent corruption allegations, several months ago as part of government reforms. Mr Abdel Al, the PRC spokesman, said that Arafat "was responsible for killing, stealing and blackmail".

"Now we have huge files about corrupt deals by Arafat and his son, Manhal, who is being interrogated and confessed to some of these corrupt deals," he said in a telephone interview. Manhal is a senior security official.

In this morning's military-style attack, about 100 gunmen overpowered dozens of bodyguards patrolling outside his four-storey home in an upscale Gaza City neighborhood. The attackers blew the iron gate off its hinges and tied up the bodyguards after a 30-minute gunbattle, Mr Abdel Al said.

After the attack, Arafat was dragged outside and shot in the sandy street. Palestinian police said three bodyguards were initially kidnapped, along with Manhal Arafat, but were later released. One bodyguard was shot in the leg. Residents said that they heard more than two dozen loud explosions.

The headquarters of the Preventive Security Service is just a block away, but security agents did not intervene. The security forces might have mistaken the shooting for one of the routine nightly training exercises militants stage in the area.

Cabinet minister Sufian Abu Zeideh said that the killing was an attack on the government. "He (Arafat) was a symbol of the authority," he told Israel Army Radio. Arafat was a founder of the ruling Fatah movement and was a senior official in the Fatah Revolutionary Council, a top policy-making body.

After he was fired as security chief, Arafat was given the considerably less influential job of military adviser to Abbas. He was a target of previous assassination attempts and always traveled in a heavily guarded convoy, using an armored limousine that once transported Yassir Arafat.

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