The divided city of Hebron was on edge today after a 63-year-old rabbi was stabbed to death in his bedroom, apparently by an Arab assailant who fled under cover of darkness to the Palestinian-controlled section of town, the army said.

The victim was Shlomo Raanan, grandson of a venerated chief rabbi of Palestine from the period of the British mandate there. Raanan was in bed at around 10:30 p.m. Thursday when the assailant scaled a 10-foot wall, stole into the home through a window and stabbed Raanan in the neck, neighbors said.

The murder infuriated Jewish settlers in Hebron -- a community of about 450 residents who live in tiny, walled enclaves among about 130,000 Palestinians. They accused Israeli authorities of doing too little to protect them.

Hebron -- patrolled by Israeli troops and Palestinian police -- is a seething, embittered place on ordinary days. Today it seemed on the brink of wider violence.

"The responsibility is on the army and police to take care of us," said Rafi Chaiken, 22, a yeshiva student who was cleaning out Raanan's house at midday today. "If a terrorist can come in and slaughter someone in his sleep, then the response should be punishment {for Palestinians}, maybe collective punishment."

The Israeli army sealed off Hebron shortly after the killing and slapped a curfew today on 30,000 Palestinians living in Israeli-controlled neighborhoods. Additional troops and police patrolled the city.

Shortly after the slaying, a group of Jewish settlers beat two Palestinian passersby outside a settler enclave, inflicting bruises. A few dozen Jewish settlers shouting slogans also marched toward the Palestinian sector but were stopped at an Israeli roadblock.

A group of 20 Palestinians was reported to have thrown rocks and bottles at Israeli soldiers this morning before Palestinian police dispersed them. At midday, Palestinian drivers in Hebron honked their horns in unison for a half hour -- a cacophony that Jewish settlers interpreted as a spiteful celebration of Raanan's murder.

In response to the killing, Prime Minister Binyamin Netanyahu cut short a vacation in northern Israel and returned to Jerusalem. He said he sent word to Palestinian leader Yasser Arafat, demanding that Palestinian security forces arrest the killer.

Netanyahu told Israeli television that mobile homes such as the one in which Raanan lived will be replaced with permanent structures in Hebron -- "one, to protect the settlement there, and two, to emphasize the permanence of a Jewish and Israeli settlement in Hebron."

Representatives of the Israeli government who arrived in Hebron were heckled by Jewish settlers.

Raanan was described as a kind and devout rabbi who prayed daily at the Tomb of the Patriarchs in Hebron and studied the Torah, the book of Jewish law and learning.

In a ceremony this morning attended by several hundred mourners, his draped body was placed under an oak tree behind his house in the tiny, heavily fortified settler compound of Tel Romeida. CAPTION: A Palestinian asks Israeli soldiers to let him pass in Hebron, which was sealed off after the stabbing death of a rabbi.