Thousands of Palestinians celebrated the terror attacks chanting "God is great" and distributing sweets to passers-by - even as their leader, Yasser Arafat, said he was horrified.

The US government has become increasingly unpopular in the West Bank and Gaza Strip in the past year of Israeli-Palestinian fighting, with many Palestinians accusing Washington of siding with Israel.

In the West Bank town of Nablus, about 3,000 people poured into the street shortly after the attacks.

Demonstrators distributed sweets in a traditional gesture of celebration.

Several Palestinian gunmen shot in the air, while other marchers carried Palestinian flags.

Nawal Abdel Fatah, 48, wearing a long black dress, threw sweets in the air, saying she was happy because "America is the head of the snake, America always stands by Israel in its war against us."

Her daughter, Maysoon, 22, said she hoped the next attack would be launched against Tel Aviv.

In traditionally Arab east Jerusalem, there was a smaller gathering of about two dozen people, many of them young children led in chants by adults.

Some drivers passing the scene honked their horns and flashed victory signs from their windows.

Mr Arafat and his top advisors huddled at his office in Gaza City, watching the events unfold on television.

He later emerged to speak to reporters.

"We are completely shocked. It's unbelievable," he said.

''We completely condemn this very dangerous attack, and I convey my condolences to the American people, to the American president and to the American administration, not only in my name but on behalf of the Palestinian people."

In the West Bank, meanwhile, the leader the Democratic Front for the Liberation of Palestine denied his group was involved in the attacks.

Qais Abdel Rahim was reacting to reports that two Arab satellite stations in the Gulf had received anonymous claims of responsibility on behalf of the DFLP, a radical PLO faction.

Abdel Rahim said his group condemned the attacks.