GAZA CITY, GAZA STRIP -- Israel killed two top Palestinian fugitives yesterday in a missile attack on their cars, triggering threats of revenge by militants that could further erode the fragile truce between the two sides.

Even as tensions rose, however, Israeli and Palestinian negotiators were trying to resolve remaining disputes over new security arrangements on the Gaza-Egypt border.

Earlier in the day, Israeli cabinet ministers approved the deployment of European inspectors at the border, a breakthrough after weeks of slow-moving talks and a major step toward giving the Palestinians freedom of movement without Israeli controls for the first time in four decades.

But Palestinian negotiators complained that Israel is stalling on other key issues linked to its pullout from the Gaza Strip in September, including creating a passage between the West Bank and Gaza and speeding up the movement of cargo and workers from Gaza to Israel.

In yesterday's air strike, missiles slammed into a car carrying Hassan Madhoun of the al-Aqsa Martyrs Brigades and Fawzi Abu Kara of Hamas. The car was driving on a main road next to the Jabaliya refugee camp when it was hit.

Just minutes earlier, Palestinian Authority president Mahmoud Abbas had travelled on the same road on his way to Gaza City, Mr. Abbas's bodyguards said.

Mr. Madhoun had been involved in rocket attacks on Israel, serving as a co-ordinator with other militant groups, including Hamas and Islamic Jihad, Israeli officials said. He also helped plan three bombing attacks in the past two years that killed 20 Israelis, including a blast in Israel's Ashdod port, the army said.

Hamas officials said Mr. Abu Kara was an expert in making homemade rockets.

Military officials said Mr. Madhoun was the main target of the attack. Nine bystanders were wounded.

Hamas and al-Aqsa, a violent offshoot of Mr. Abbas's ruling Fatah movement, threatened revenge. "This is an open war," Hamas spokesman Mushir al-Masri said. "[The Israelis] are going to pay a heavy price for their crimes."

Hamas and al-Aqsa did not say an informal nine-month-old truce was off, but they have insisted on the right to respond to Israeli strikes, a position Mr. Abbas has dismissed as unacceptable. Since the truce deal, Hamas and al-Aqsa have refrained from carrying out attacks on Israel, while Islamic Jihad has been responsible for four suicide attacks.

International mediators, meanwhile, tried to wrap up a deal on reopening the Rafah terminal on the Gaza-Egypt border, the Gazans' gate to the world. Israel closed Rafah before withdrawing, and Mr. Abbas agreed he would only reopen the border with Israeli agreement.

Israel's security cabinet agreed yesterday to deploy European inspectors to replace Israeli border personnel, who had controlled Palestinian movement in and out of Gaza since capturing the territory in the 1967. Israel and the Palestinians disagree, however, on how much authority the inspectors should have -- the Palestinians consider them to be advisers, while Israel wants them to be in charge.

Israel also wants to be able to monitor Rafah traffic via closed-circuit TV, a demand the Palestinians reject.

A reopening of the border could give Mr. Abbas a badly needed boost as he heads into the Jan. 25 parliamentary election. Hamas is expected to pose a strong challenge, and until now, Gazans have seen few real benefits from the Israeli departure.