"The Fatah central committee reached a compromise that was approved in a vote by the majority of its members," a source close to Arafat said, on condition of anonymity.
The deal, reached late on Friday, was the result of a compromise between Arafat and Prime Minister Ahmad Quraya, who had been at loggerheads over the appointment of a new interior minister.
Quraya has renounced efforts to persuade Arafat to accept his candidate for the post, General Nasirr Yusuf, and the post will go to a close associate of Arafat, Hakam Balaawi, the source said.
But Balaawi's responsibilities will be limited to civil issues and the all-important job of security will be handed to the Supreme National Security Council, of which both Arafat and Quraya are members.
Quraya will form the enlarged
cabinet in the next few days
The US State Department said on Tuesday it wanted the Palestinian prime minister to have control of all Palestinian security forces.
The council was set up in September to oversee the security services in the Palestinian territories.
It is chaired by Arafat and has as its members, Quraya, the finance and interior ministers, Arafat's national security advisor and a member of the Palestine Liberation Organisation executive committee.
Instead of becoming interior minister, Yusuf could be named deputy prime minister in the new cabinet, Fatah sources said.
Friday's agreement came after three days of fierce negotiations within the Fatah leadership.
The new and enlarged cabinet, which is to be submitted to the Palestinian Legislative Council within the next few days, will have about 20 members, including the seven ministers in Quraya’s outgoing "emergency cabinet".
Quraya replaced Mahmud Abbas as prime minister when the latter resigned after a bitter power struggle with Arafat for control of the Palestinian security services.
Meanwhile, the Israeli and Palestinian figures who launched the so-called Geneva peace initiative announced on Friday that they had received a letter of encouragement from US Secretary of State Colin Powell.
The two sides would meet in Geneva on 1 December, "to reiterate their commitment to their plan", according to the Swiss foreign ministry.
"Today we received a message from Secretary of State Powell in which he said he supported and understood our undertaking"
Yasir Abd Rabbu,
ex-Palestinian information minister
Former Israeli justice minister Yossi Beilin and former Palestinian information minister Yasir Abd Rabbu - seen as the two main initiators of the document - also expressed their satisfaction at the growing support the plan was receiving.
"Today we received a message from Secretary of State Powell in which he said he supported and understood our undertaking," Abd Rabbu said during a meeting on the initiative held in Jerusalem.
The Geneva initiative deals with all key points in the Israeli-Palestinian conflict, including the thorny issues of the Jewish settlements and the borders of a future Palestinian state.
Under the agreement reached by all sides involved in drafting the plan, the Palestinians will waive the right of return for some 3.8 million refugees, while sovereignty over Jerusalem will be shared.
Palestinian leader Yasir Arafat has unofficially lent his support to the plan, which was partially financed by Switzerland.
On Wednesday, UN Secretary General Kofi Annan hailed the peace effort and stressed that it was not incompatible with the continuation of efforts to implement the "road map" to peace.