The Palestinian leader phoned Brig Gen Abd Al-Razzaq al-Majaidah and asked him to return to the office he left last week at Arafat's request, said Nabil Abu Rdainah, a senior Arafat adviser.
Arafat took the decision to calm the anger that has spilled on to the streets of Gaza over the appointment of Musa Arafat al-Qidwi, Rdainah said. Opponents claimed the appointment perpetuated a system of corruption and cronyism endemic among the Palestinian leadership.
But Musa Arafat retained a senior security post in Gaza, subordinate to al-Majaidah who has overall authority in both Gaza and the West Bank, the officials said.
Quraya resignation stays
Quraya awaits word from Arafat
In Ram Allah, Palestinian Prime Minister Ahmad Quraya on Monday said his resignation stood for now and that he was awaiting a written response from Yasir Arafat.
"Yes, I have submitted my resignation in writing to the president...(over) the state of chaos and lawlessness (in Gaza). As yet, I have not received a written response and therefore I consider that the resignation stands," Quraya told reporters.
"However, most of the ministers in the cabinet are against this
resignation," he said.
On Sunday night, Palestinian fighters stormed an intelligence office in one Gaza refugee camp and marched through another, protesting at Musa Arafat's appointment.
Al-Aqsa fighters took to the
streets against Arafat's move
But in Gaza City on Monday, hundreds of his supporters marched through the streets, some firing assault rifles into the air - raising the possibility of a violent conflict over the appointment.
"We will protect you by our soul and our blood, our hero Abu Amar," the demonstrators chanted, referring to Yasir Arafat.
The turmoil in Gaza was a grave challenge for Arafat and highlighted sharp rifts between the veteran Palestinian leader and the cabinet that is supposed to be running West Bank and Gaza.
Dozens of masked fighters marched near Musa Arafat's office in the Nussairat refugee camp in central Gaza after sundown on Sunday, chanting: "No to Musa Arafat, yes to reform."
Many Palestinians feel Musa Arafat is a member of the "old guard," allegedly steeped in corruption and known as a cruel commander.
"He [President Arafat] is the only one who can ask me to quit my job"
Musa Arafat al-Qidwi
Earlier, in a rare news conference, Musa Arafat brushed aside protests over his appointment. "I take my orders from His Excellency President Arafat," he said, seated below a huge portrait of his mentor. "He is the only one who can ask me to quit my job."
He said he was ready to "engage in any battle against any potential enemy," and made it clear the enemy could come from within the Palestinian camp.
Up to now the head of the Palestinian intelligence services, Musa Arafat has a reputation for ruthlessness. He was among the founders of al-Fatah in 1965 and has stood by his cousin's side since then.