Three pipe bombs exploded simultaneously at a bustling intersection in this town today, injuring 27 people and souring the mood a day before the start of intensive negotiations to reach a comprehensive Middle East peace agreement.

Israeli police blamed Islamic militants for the attack and arrested two Palestinians on suspicion of planting the bombs. Authorities found and destroyed a fourth, unexploded bomb in the vicinity.

The bombing fit a pattern of attacks by Islamic extremists timed to undercut progress, or the possibility of progress, in peacemaking here. Israeli and Palestinian representatives are scheduled to begin intensive talks Monday to resolve the toughest issues that divide them, with the goal of drafting a framework agreement for a permanent peace deal by mid-February, and a final treaty by next fall.

Israeli security officials have been warning for weeks that new terror attacks could coincide with intensified peace talks. Over the weekend, the Islamic Resistance Movement, Hamas, warned it would escalate attacks against Israel, but the group made no claim of responsibility for today's incident. Hamas opposes the peace process and sees it as a sellout of Palestinian interests.

Israeli Prime Minister Ehud Barak condemned the bombing, but made it clear there would be no postponement in the peace talks. "This government is determined not to yield to any kind of terror and to crack the terror activities in this country, whether from within or from without," he told reporters.

Yasser Abed Rabbo, chief Palestinian negotiator for the talks starting Monday, also criticized the attack, which he said "harms the atmosphere as we prepare to begin final status negotiations."

The bombs, packed with nails, planted in a trash can and apparently detonated by a timer, were not very powerful. A handful of the victims required surgery, but most of the injuries were light to moderate. There was little damage to adjacent stores.

But the bombs were clearly intended to cause maximum possible harm to civilians in this scruffy coastal town north of Tel Aviv. The bombs exploded in Netanya's busiest commercial neighborhood at 10:30 a.m., the height of the midmorning shopping rush on the first business day of the week in Israel.

"There was a loud boom, and then one man was scrambling on the streets on his hands, with his leg mangled," said Shemyan Masoud, who owns a clothing store across the street from the bomb site. "Just as it happened, my wife was right here with me with my two babies, and I, a 35-year-old man, cried like a 12-year-old boy."

Shortly after the explosion, which occurred in the same location as a similar terror attack in 1977, television crews fanned out on the scene and a few dozen right-wing Israelis demonstrated in the street. They chanted, "Death to the Arabs!" and denounced Barak's policy of proceeding with peace negotiations.

"The way Barak talks gives them the impression this is okay," said Yehoshua Yaish, 55, a diamond cutter. "The Arabs don't honor any of the agreements, but Barak gives and gives."

A middle-aged woman, listening to this, exploded in rage. "We have to strike" the Arabs, she yelled. "Not eat, drink and be merry! Our nation is retarded!"

Hard-line politicians also attacked the government, which has recently made a series of moves to build confidence with the Palestinians and revive the long-stalled peace process. Since Barak took office in July, he has released some 350 Palestinian so-called security prisoners from Israeli jails, opened a safe-passage route for Palestinians to cross Israel between the West Bank and Gaza Strip and withdrawn Israeli troops from a chunk of West Bank land.

He is also poised to hand over more West Bank territory to Palestinian control next week, in compliance with an interim peace deal signed two months ago.

Right-wing opponents of the government say forging ahead with such concessions in the face of ongoing terror attacks makes a mockery of the peace process and exposes Israel's weaknesses. They accuse Barak of abandoning the tough line adopted by his predecessor, Binyamin Netanyahu, which some Israelis believe helped reduce the bloodshed from terror attacks in recent years.

"It's pretty clear that the terror attacks . . . will continue and even increase because of the government's forgiving attitude toward the Palestinians," said Uzi Landau, a hard-line member of Israel's parliament, who belongs to Netanyahu's Likud party.

However, Israeli security officials said Palestinian leader Yasser Arafat has been cooperating in the fight against terrorist groups, who oppose him politically. And Barak's allies insisted that suspending the peace process because of bombings such as today's would reward the terrorists with exactly what they want.

"We should remember that there are extremist elements that are doing everything to destroy the peace process," said Binyamin Ben-Eliezer of Barak's Labor Party, a retired army brigadier general. "This process should not stop."