Nearly everything about Bethlehem these days--the bulldozers working overtime, the fresh green paint on shop doors, the buzz of tourists on spruced-up Manger Square--suggests the urgency of the looming millennial deadline.

In the months to come, Pope John Paul II and numerous heads of state are expected to visit the Church of the Nativity, which commemorates Jesus's birthplace. Sting, Pavarotti and the Vienna Boys' Choir are booked to perform. Organizers say a world-famous pop star will appear in concert on New Year's Eve; the name is a closely kept secret.

But amid the bustle and preparation, streets at the town's entrance echoed today with the boom and crackle of Israeli troops firing tear gas and rubber-coated bullets at stone-throwing Palestinian demonstrators. Ambulances shuttled wounded from the scene, and the freshly painted shop doors were nearly all shuttered.

For organizers of Bethlehem 2000, the yearlong festival planned for the millennium, the violence was a nightmare come true. The town, whose residents number just 30,000, is the beneficiary of a $100 million face-lift, an injection of cash, planning and new roads designed to showcase not only the birthplace of Jesus but also the Palestinian Authority, in whose autonomous territory Bethlehem is situated. Some 2 million tourists are expected next year.

"No doubt there will be cancelations," said Hanna Nasser, Bethlehem's mayor, who received the news of the rioting glumly. "This is seen [on television] all over the world, and if we have a few incidents like this it will affect the celebrations very badly."

Since the Oslo peace agreement of 1993, Israeli troops have withdrawn from most Palestinian cities and towns on the West Bank, including Bethlehem, six miles south of Jerusalem. But just inside the town's northern boundary is the tomb of the biblical matriarch Rachel, a site sacred to religious Jews, and in front of it is a small Israeli army checkpoint.

A Palestinian man was shot to death Monday at the checkpoint,and that has ignited two days of rioting that have left at least 30 Palestinians and two Israelis injured.

Accounts of what happened at the checkpoint are sharply at odds. According to the Israeli army, the Palestinian was shot when he pulled a knife and tried to stab an Israeli soldier. The man, Moussa Halil, a 29-year-old postcard seller, was said to be emotionally disturbed and estranged from his family. The Israeli media reported he had once been active in Palestinian resistance organizations. The army displayed a photograph of the knife allegedly used in the attack, which appeared in Israeli newspapers today.

However, Palestinian witnesses, including several who were at two gas stations across the narrow street from the checkpoint, told a different story. They insisted the shooting was accidental. Several said the army planted the knife on the scene after the fact.

They said in interviews that the soldier called out to Halil as he was passing by and motioned him over to ask for a cigarette. When Halil approached the soldier and reached into his pocket, the Israeli's rifle went off unintentionally, according to the witnesses.

"I didn't see the soldier point the weapon at Moussa," said Moanz Shaktor, a gas station attendant interviewed by B'Tselem, an Israeli human rights organization. "The behavior of both of them was natural. . . . After the shooting, the soldier tried to beat his head with his hands in anguish over hitting Moussa."

That account matched the version of at least three other Palestinian witnesses, who watched from just across the street. Two of them, interviewed separately from B'Tselem, described the soldier beating his head and crying out hysterically as his comrades led him away from the scene after the incident.

"It was an accident," said one witness. "This guy Moussa was so meek, he couldn't kill a chicken."

B'Tselem said an Israeli official investigator came to the scene but did not interview the Palestinian witnesses.

The incident took place amid rising tensions in Bethlehem. In recent months, the Israelis have been expanding and widening the checkpoint at the edge of town, a project they say is meant to accommodate tour buses expected in the millennial year. The Palestinians, furious, insist that the refurbished checkpoint, scheduled to open in a month, is designed to seal off the town and limit access for Palestinians to Israeli-controlled Jerusalem.

"This checkpoint is part of the methodology of apartheid," said Mariam Shahin, spokeswoman for Bethlehem 2000. "Tourists will be separated from the Palestinians. It's like a zoo; you've got one entrance for the animals and one for the gawkers."

As the streets around the checkpoint boiled over in anger, tour buses coming from Jerusalem were forced to detour around the trouble on their way to the Church of Nativity. On a side street near the shooting and stone throwing, a lone American tourist stood studying his map, determined to reach his destination no matter what the obstacles.

"I heard the gunshots, but I've only got one day left, and I really want to see the Church of the Nativity," said Christopher Okechukwu, a New Jersey attending a week-long medical conference in Israel. "I don't think things will calm down, so I guess I'll have to use side streets to get there."

CAPTION: With a cross behind them, Palestinians in Bethlehem throw stones at Israeli soldiers.

CAPTION: Israeli medics carry the body of a Palestinian souvenir seller killed after allegedly attempting to stab an Israeli soldier at a checkpoint in Bethlehem.