Israelis crying and singing "The nation of Israel lives" marched out of Taba only seconds before Egypt raised its flag over the tiny strip of beach, capping a nearly 7-year-old border dispute.

Dozens of Egyptian workers in Taba to erect a border station and spruce up the area for the Wednesday changeover climbed a hill opposite the five-star Taba Sonesta Hotel. They waved keffiyehs and an Egyptian flag while chanting, "Taba, Taba, Taba. Tomorrow Palestine."Israel lowered its flag over the beach facing the Gulf of Aqaba on the Sinai Peninsula Tuesday night, and the Egyptian flag was raised in a low-key ceremony at noon Wednesday, completing another article of the 1979 Egyptian-Israeli peace treaty.

Egyptian President Hosni Mubarak was on an official visit to West Germany, but in remarks broadcast by Egyptian Television, he said, "The return of Taba marks the completion of the liberation of the Egyptian land and this makes every Egyptian and every Arab happy.

"My message to every Egyptian, every Arab and everybody else is that peace is very precious and peace is . . . worthy of making any concessions no matter what they could be for peace is life itself," Mubarak said.

Mubarak said he will deliver a nationwide "peace message" Sunday after he raises the Egyptian flag over Taba.

In one of many commentaries broadcast Wednesday by state-controlled Cairo Radio, the Taba transfer was seen as a "real beginning for the return of the rest of the occupied territories in the West Bank, Gaza and the Golan Heights."

With the resolution of the Taba border dispute, analysts expect Egypt to press Israel to solve the Palestinian issue on the occupied West Bank and Gaza Strip where an uprising has been raging since December 1987.

"We hope that Taba will turn into a model of living together," Israeli Foreign Ministry spokesman Alon Liel said. "We hope that this will be an example for other aspects of the relationship and for the relationship with other countries in the Middle East."

An Egyptian military squad, Egypt's consul general to Eilat, now Israel's most southern city, and more than 100 Egyptian workers were among those attending the ceremony on a ridge opposite the Sonesta Hotel.

Ahmed el-Messeiri, Cairo's consul general in Eilat, told the Middle East News Agency that the return of Taba to Egypt was "the fruit of an Egyptian diplomatic accomplishment, sweat and effort and the hoisting of the Egyptian flag is the best proof for that."

While the Egyptian officials kept a low profile, the emotion of the transfer swept the workers who began chanting in Arabic "God is Great" and singing Egypt's national anthem, "My Country, My Country."