The World Bank, seeking to defuse one of the nastiest rifts among its member countries in years, yesterday approved but deferred funding for a loan that would help resettle poor Chinese farmers on land claimed by Tibetans as historically theirs.

Under the compromise plan, the bank pledged to withhold funds until a panel reviews the project. The compromise won majority support in a rare divided vote of the bank's 24-member board.

But the dispute deepened the chill in diplomatic relations between China and the United States, which voted against the loan. And the compromise failed to satisfy Tibetan-rights advocates, who fear that the project will go forward in a few months, increasing the influx of non-Tibetans into Tibetan territory.

World Bank President James D. Wolfensohn, who brokered the agreement, said in an interview that he had just been through "the toughest five weeks I've had at the bank."

But he expressed relief that a way was found to resolve -- at least for now -- a spat that has threatened to damage the bank's relations with some of its 181 member nations, especially China, the biggest borrower.

"I'm delighted at the outcome, because it allows for a much less heated and more transparent discussion of the project," he said.

The controversy revolves around a $40 million portion of the loan that, on the surface, involves typical World Bank anti-poverty lending. About 58,000 farmers, many of whom suffer malnutrition living on incomes averaging $60 a year, would be moved from heavily eroded hillsides to a sparsely populated area a couple of hundred miles away, where they would be provided with electricity, irrigation, health and education systems.

But although the resettlement will take place within China's Qinghai province rather than in neighboring Tibet itself, the plan raised red flags among activists championing human rights in Tibet, which was taken over by China in the 1950s.

Qinghai province is the birthplace of the Dalai Lama, Tibet's spiritual leader, and the plan would allegedly dilute Tibetan cultural identity by reducing the proportion of ethnic Tibetans in the area. Members of Congress joined the outcry, as did celebrities sympathetic to Tibetans' plight.

Environmentalist critics also alleged that the bank had sought to hustle the loan through its approval process as if it weren't environmentally sensitive, in violation of its own procedures. This was the main reason U.S. officials were cited for their "no" vote. Germany also voted against, and four directors abstained.

The majority voted to approve the loan after reaching agreement that no work would be done on the project and no money disbursed pending a review by the bank's inspection panel. The process could take two months or longer. China also agreed to allow foreign politicians and journalists to travel to the area and interview local people without government officials present.

But John Acklerly, an official with the International Campaign for Tibet, said that while he respects the panel's integrity, "the board could reject the panel's recommendations."

Yu Shuning, a spokesman for the Chinese Embassy, said, "We are very upset with the U.S. position."