Palestinian officials said the transfer of around 20 men from al-Aqsa Martyrs Brigades could lead to an Israeli pullback from Ramallah, where Arafat has been confined since December 2001.
The move follows Israeli calls for the men, whom they accuse of anti-Israel attacks, to be expelled.
"We will send them to Gaza or to Jericho," Arafat said on Monday, although he did not give a date for the transfer.
However, one of the detained men said the group remained defiant.
"If there is some decision to transfer us to Jericho or Gaza, we will decide on protest measures over the next 24 hours" -- Mohammed Ghassan, one of the detained
"We will not in any way accept a decision to be transferred to Gaza or Jericho, even if we would be allowed to walk around free rather than sitting in jail," said Mohammed Ghassan, one of the detained men.
"The only thing we will accept is to remain in Ramallah. If there is some decision to transfer us to Jericho or Gaza, we will decide on protest measures over the next 24 hours."
Arafat's bodyguards confined the resistance fighters to one room in the Ramallah headquarters on Sunday after they refused to move to a jail in Jericho.
The Brigades have threatened to resume attacks on Israel and shatter a US-backed "road map" to peace over the transfer talks.
They accuse Israel of breaking the truce on anti-Israel attacks by aggressively pursuing their members.