The city that was once the capital of the ancient kingdom of Israel and later was called "Mountain of Fire" because of the blazes its people set to stave off Napoleon's army has reverted to Palestinian rule after 28 years of Israeli occupation.

Palestinian police raised their flag over the former Israeli military headquarters in Nablus while thousands jammed the streets Monday night, singing and dancing, happy that Israel had pulled out 48 hours earlier than expected to lessen the chance of confrontations with Palestinians.

The city of 130,000 is the biggest of six due to be handed over by the end of the year under an accord signed in September in Washington between Palestine Liberation Organization leader Yasser Arafat and Israeli Prime Minister Yitzhak Rabin. Rabin was assassinated last month, and an Israeli Jew opposed to the peace agreement has confessed.

"I am very happy for the liberation of Nablus and because what we had agreed upon is being implemented faithfully," Arafat told reporters in the self-rule area of the Gaza Strip.

Thousands cheered here as Palestinian police raised the flag while the Palestinian national anthem was played. "This is a historic moment in our lives. We can't believe the Israelis are actually out of our lives," said Majed Masri, 23.

Palestinians were happily surprised when they saw the last of five Israeli army jeeps leave. "The Israeli military governor called us and said they wanted to leave Nablus at 11 p.m., but they escaped earlier because they were afraid there would be bloody clashes with the people," a senior PLO official said.

As word spread over loudspeakers and celebrants fired shots into the air, Palestinians streamed into the muddy streets, many in pajamas. They sang and danced through the night.

Israel has accelerated the transfer of parts of the West Bank to Palestinian self-rule. Nablus was the third of six towns to change hands, after Jenin and Tulkarm. Bethlehem, Qalqilya and Ramallah are to be returned later this month.

Palestinian officials face a daunting task keeping order in Nablus. They worry about the large number of guns in the hands of the public and the possibility of violence fomented by Palestinian extremists.

"We are living in a state of security chaos," said Tayeb Abdel-Rahim, secretary general of the Palestinian Authority. "There are a lot of weapons, and we reiterate that the Palestinian Authority will not allow anyone to threaten the sovereignty of law and the safety and the security of its citizens."

About 200 members of Arafat's Fatah faction of the PLO were paid to enforce discipline during the eight-year Palestinian uprising against Israeli occupation of the West Bank and Gaza Strip. Despite the peace agreement, these young gunmen have ignored his orders to lay down their weapons.

Nablus has a long history of resistance to foreign armies. In 1799, its people set fires to stymie Napoleon's invading army. After World War I, Nablus spearheaded resistance to British rule, and under Israeli occupation, which followed the 1967 Middle East war, it became a cradle of Palestinian nationalism, giving birth to guerrilla groups. During the Palestinian uprising, or intifada, its people confronted Israeli soldiers daily.

Excavations show the city was inhabited as long ago as 4,500 B.C., and the city's modern name, Nablus, was coined from the Latin "Flavia Neapolis." Its biblical name is Shechem, the name by which Israelis know it. It contains sites sacred to both Muslims and Jews, including Joseph's Tomb, traditional burial site of the son of the patriarch Jacob. Jews visiting the tomb will be guarded by joint Israeli-PLO patrols.