-- Israel and the Palestinian Authority have agreed that Jewish settler homes in the Gaza Strip will be demolished as Israeli citizens and soldiers leave the area this summer, Secretary of State Condoleezza Rice announced Sunday after two days of meetings with Israeli and Palestinian officials.

The accord settles a long-festering issue and is the first significant agreement between the two parties in the complex and potentially violent undertaking, which began as a unilateral step by Israel to separate itself from the Palestinians. In recent months, both sides have complained that the other has failed to coordinate. But Rice emerged from the intensive discussions saying that both sides had agreed to a set of principles, including a pledge to coordinate plans and "ensure that disengagement proceeds smoothly, without violence."

Mahmoud Abbas, president of the Palestinian Authority, and Israeli Prime Minister Ariel Sharon plan to meet Tuesday in Jerusalem to discuss the Palestinian cease-fire and other vexing issues. Rice had come to the region saying she was not planning to negotiate for the parties, but the decision to have the secretary of state announce the principles underscored the increasingly central role of the United States in the Gaza withdrawal.

Rice said the Israelis and Palestinians had agreed to coordinate on security to ensure peace and "create the conditions for economic viability and hope," that Palestinian goods and people should flow "in and out of Gaza at a level that will allow for economic revival" and that the settler homes in Gaza should be removed.

"The course ahead is going to require even more coordination," Rice said. "There need to be no surprises between the two sides in terms of what's going to happen in the Gaza."

Under the housing plan, once the disengagement begins Aug. 15, the Israeli military will begin to destroy the 1,200 homes over at least the following three weeks as settlers leave -- or are forced from their homes. The cleanup and removal of the debris will be handled by Palestinians, creating a jobs program and an incentive for Palestinians to plan how the areas are used in the future. The estimated cost of the cleanup will be $50 million to $60 million, a U.S. official said, and a senior Israeli official said Israel would seek the help of international donors to defray the cost.

The matter of the homes illustrates the mix of political, economic and perception issues that has thwarted cooperation between the two sides on Israel's plans to vacate 21 settlements in Gaza and four small settlements in the northern West Bank. The settlements and areas controlled by the military make up 20 percent of the Gaza Strip, including much of its fertile land and all of the southern seashore.

In order to win a parliamentary vote on the Gaza withdrawal last year, Sharon had pledged to dismantle the homes. Palestinian officials were not eager to keep the red-roofed, middle-class homes, and there are not enough of them to house the 1.3 million Palestinians who are struggling for housing in the narrow coastal strip. But some Palestinian officials have been hesitant to coordinate too closely with Israel on the issue, believing it would undermine claims that Israel was driven from Gaza.

Under international law, Israel is required to return the property as it had been when it seized it during the 1967 war, which would mean a costly and time-consuming cleanup and leave Israeli soldiers vulnerable to attack for months. Moreover, indiscriminate destruction of the homes could ruin water and sewer lines necessary for future development.

A variety of other issues still must be settled, including the transfer of greenhouses and other facilities to the Palestinians. Israel also is vehemently opposed to the rebuilding of Gaza's airport and continues to reject giving lethal weapons to overhauled Palestinian security forces, two senior U.S. officials, speaking on condition of anonymity, said in a briefing for reporters traveling with Rice. But officials said they believed the Israelis and Palestinians were on the cusp of beginning regular, senior-level discussions, in contrast to the complete lack of communication between the two sides as recently as three months ago.

A U.S. Army lieutenant general, William E. Ward, has been working with the Palestinians on overhauling security forces, while James Wolfensohn, the former World Bank president, has been charged with overseeing economic issues. But in a measure of the dangerous situation, Ward, Wolfensohn and other U.S. officials are prohibited from traveling in Gaza; Wolfensohn visited the area under British protection shortly before he left the World Bank.

Violence erupted in Gaza both on Saturday, when Rice met with Abbas, and Sunday, when she met with Sharon. On Saturday, Israeli soldiers killed a gunman from the militant group Islamic Jihad who attacked a Jewish settlement in southern Gaza.

Israeli officials said an Israeli soldier was killed and two others were wounded Sunday morning when Palestinian gunmen fired an anti-tank missile at an Israeli military post along Gaza's heavily fortified border with Egypt. In apparent coordination, the attack came moments before Palestinian fighters fired rocket-propelled grenades and light arms at Israeli soldiers and civilians engaged in construction work nearby, Israel military officials said.

The area has been a major smuggling route for armed Palestinian groups bringing weapons into Gaza. Islamic Jihad and Ahmed Abu Rish Brigades, an armed offshoot of the Fatah political movement, asserted joint responsibility for Sunday's attack. One Palestinian gunman was killed in the ensuing gun battle.

On Monday morning, according to the Israeli army, Palestinian gunmen killed one Israeli and wounded another in a drive-by shooting on their car in the town of Homesh in the northern West Bank.

Among the issues Israeli officials hoped to resolve during Rice's visit was the Bush administration's concern over Israeli arms sales to China, something that has caused friction between the United States and Israel over the past six months. Israeli press reports Sunday suggested that the United States would be given the right to review all future Israeli arms sales to foreign countries, although Israeli officials said an agreement on the matter had not been reached.

Visiting Jerusalem on Sunday, Chinese Foreign Minister Li Zhaoxing told reporters that bilateral trade with Israel would double in the coming years.

The United States has expressed concern over Israeli weapons sales to China for the past 15 years. But the issue came to a head five years ago when U.S. pressure scuttled Israeli plans to sell Phalcon reconnaissance aircraft to China, a deal valued at between $250 million and $1 billion.

The most recent dispute arose last year over Israel's plans to provide spare parts for a fleet of Harpy armed drone aircraft it originally sold to China in the late 1990s with U.S. approval. U.S. defense officials complained that the spare parts constituted a significant upgrade of the aircraft. In protest, the Pentagon froze cooperation with Israel on several joint weapons projects.

"If things were done that were not acceptable to the Americans, then we are sorry, but these things were done with the utmost innocence," Foreign Minister Silvan Shalom said on Israeli radio Sunday.

Condoleezza Rice announced the agreement after two days of talks. Under Israel's agreement with the Palestinians, the army will destroy 1,200 homes in Gaza.