JERUSALEM -- The Israeli Cabinet yesterday canceled a controversial land confiscation in Jerusalem, just hours before a parliamentary vote on the issue seemed likely to topple the government.
The Cabinet's last-minute retreat defused an issue that had mushroomed, enraging the Arab world, jeopardizing Arab-Israeli peace negotiations and forcing the United States to rescue Israel from condemnation by the United Nations Security Council.
In a hastily called meeting, the Cabinet canceled the confiscation of 131 acres of land in Jerusalem, most of it owned by Palestinians. The land was to be used as a site for new Jewish housing, an Israeli police station and a new road.
"It was clear the government was about to fall," said Prime Minister Yitzhak Rabin, a collapse that "would have endangered the entire peace process."
Mr. Rabin seemed determined to weather the international controversy over the confiscation, which was disclosed April 27. But he backed down in the face of maneuverings in the Knesset, Israeli's parliament.
His main opponent was the right-wing Likud Party. It wholeheartedly supported the land confiscation but was prepared to join two small Arab parties in voting against it. The combination would have had enough votes in the Knesset to topple the government.
"We were ready to face the entire world, but the last thing we expected was that the Likud and opposition parties would undermine the decision to expand Jerusalem," said Mr. Rabin.
"The Likud preferred its lust for power to construction in Jerusalem."
Israel has confiscated nearly 7,000 acres of land within the Jerusalem city limits since it captured Arab East Jerusalem in 1967. But this was to be the first significant confiscation since Israel and the Palestinians signed a peace agreement in September 1993.
Palestinians were outraged at the Israeli move, saying it violated the agreement to negotiate the issue of Jerusalem beginning next year. The Palestinians claim East Jerusalem as theirs; Israel claims sovereignty over the whole city.
"It seems that the Palestinian, Arab and international efforts have paid off," a spokesman for Yasser Arafat, chairman of the Palestine Liberation Organization, said yesterday.
Even moderate Arab governments edging toward improved relations with Israel had joined the outcry and threatened to freeze the gradual improvement in ties. In Jordan, which has already signed a peace agreement with Israel, a majority of parliament had demanded that the government recall its new ambassador to Israel.
Internationally, Israel was virtually without supporters except for the United States, and it was criticized strongly in Europe.
The United States last week vetoed a U.N. Security Council resolution that had been supported by all 14 other members, who demanded a reversal of Israel's move.
Arabs were particularly bitter over the U.S. veto, saying it ended America's role as an impartial mediator in the peace process.
Ehud Olmert, the right-wing mayor of Jerusalem, said yesterday's Cabinet decision betrayed the United States. "The U.S. fought in the Security Council and, in the end, like a band of cowards lacking the minimum of self-respect, [the Cabinet] lay on the ground, embarrassed, and surrendered," said Mr. Olmert, a member of the Likud.
"It's a disgrace to the government of Israel," said Moshe Katzav, chairman of the Likud faction in parliament.
Arab leaders were scheduled to meet in Morocco on the issue. But they suspended their meeting after the Israeli Cabinet's surprise decision.
The parliamentary crisis in Jerusalem was prompted by two tiny leftist parties that took advantage of Mr. Rabin's razor-thin majority in the Knesset.
Mr. Rabin usually relies on those two parties to help block "no-confidence" motions by the opposition, led by the Likud. Mr. Rabin met with the two parties but failed to persuade them to withdraw their motion, leaving him little choice but to convene the Cabinet to reverse its decision.
The coalition against Mr. Rabin then fell apart, as the prime minister had hoped. The motion to bring down the government failed.
The Cabinet meanwhile established a committee, to be led by Mr. Rabin, to study the issue of land confiscations.
But the issue left bitter feelings on many sides.
Environment Minister Yossi Sarid, whose liberal Meretz Party is part of the government but opposed the confiscation, said supporters of the confiscation "couldn't see beyond their noses."
"They didn't realize the implications," he said.