Even as a peace deal with the Palestinians appeared closer at hand, Prime Minister Benjamin Netanyahu paid a surprise visit Tuesday to Jewish settlers in the tense Palestinian town of Hebron and promised to expand their community.

Netanyahu's gesture was aimed at appeasing his hardline critics, including many settler leaders, who have demanded that Israel break off negotiations with the Palestinians following the killing of a well-known Hebron rabbi, apparently by a Palestinian, last week.

Netanyahu and Palestinian leader Yasser Arafat reportedly have softened their positions on an Israeli troop withdrawal in the West Bank after a 17-month stalemate.

The progress made in recent days apparently was not sufficient to persuade U.S. Mideast envoy Dennis Ross to return to the region to try to finalize a deal.

In an unannounced condolence visit to Hebron Tuesday, Netanyahu said he would build new homes for the 450 Jews living in the city of 130,000 Palestinians.

"I care. I want them to have security and permanency and expansion and they deserve it," Netanyahu said.

He said proposals to build permanent housing in the Jewish enclave of Tel Romeida, a small trailer park where the rabbi was killed last week, were submitted for approval Tuesday.

Netanyahu also approved the construction of an apartment building for settlers next to the enclave of Beit Hadassah, the Yediot Ahronot daily said.

Finance Minister Yaakov Neeman, meanwhile, has set aside $2.7 million for Tel Romeida construction, and on Monday an additional $24.2 million was approved for settlement expansion throughout the West Bank.

The United States offered a proposal in January for an Israeli withdrawal from 13 percent of the West Bank, in exchange for Palestinian security gestures. The Palestinians accepted the proposal, but Israel did not and the sides have been haggling since.

On Monday, Arafat said new Israeli ideas submitted in recent days were "a beginning" and that he would accept an Israeli formula under which some of the land slated for withdrawal would be nature reserves where Palestinians would not be allowed to settle.