In a somber meeting marked by skepticism on both sides, Palestinian leader Yassir Arafat and Israeli Foreign Minister Shimon Peres announced plans Wednesday to formalize a shaky cease-fire and end a year of Mideast fighting.

But even as the leaders met in the southern Gaza Strip, shooting broke out just a few miles away, leaving a Palestinian teenager dead.

The United States had been pressing hard for the meeting, and the two sides agreed to resume security cooperation that has long since collapsed. In a first gesture, Israel was to ease military blockades that have severely disrupted daily life in the Palestinian areas.

``No one came with great joy and everyone has grounds to worry if this agreement will be implemented on the ground, but it was an important meeting,'' Peres said afterward.

A series of cease-fires have failed to take hold over the past year, and the Palestinians also struck a cautious note.

``The meeting was a first step,'' said Palestinian Information Minister Yasser Abed Rabbo. ``But if there are no practical procedures on the ground, this may lead to a setback.''

In Washington, Secretary of State Colin Powell called the agreement to hold security talks a hopeful sign that might lead to the sides tackling the key issues that have divided Israel and the Palestinians.

``I am pleased some progress was made,'' Powell said. ``I hope we can move rapidly.''

President Bush saw Wednesday's meeting as ``an important step forward in restoring confidence and changing the situation on the ground,'' said White House spokesman Ari Fleischer.

Just three miles from the meeting site at Gaza International Airport, Palestinian youths threw stones at Israeli troops, who responded with fire, killing 16-year-old Mahmoud Qushta and wounding 11 other youths, Palestinian witnesses and doctors said.

Earlier, three Israeli soldiers were wounded when Palestinians set off a bomb at an army post in the same area, near the border with Egypt. The militant Islamic group Hamas claimed responsibility.

The most recent truce, negotiated by CIA chief George Tenet in June, never took hold. However, there were hopes the current cease-fire would stick.

The United States wants calm in the Mideast as it tries to bring Arab states into an international anti-terror coalition in the aftermath of the suicide attacks in America. Neither Israel nor the Palestinians wants to be seen as undermining the American efforts.

Still, the Israelis and Palestinians have not solved any of their fundamental differences. Israeli Prime Minister Ariel Sharon had been reluctant to even allow Wednesday's talks, and had canceled two previous meetings. Sharon has portrayed Arafat as an unrepentant terrorist and said he could not be trusted. The Palestinians, in turn, have been concerned that Peres, the leading dove in Sharon's government, has only a limited mandate.

A major test of the truce will come Friday when Palestinians plan to mark the first anniversary of the fighting with marches across the West Bank and Gaza Strip. Often such marches lead to confrontations with Israeli troops.

Peres is to meet with two senior Palestinian negotiators on Friday to work out details of the truce plan.

One difference quickly emerged: the Israelis want five weeks of calm as a testing period before moving ahead with confidence-building steps, while the Palestinians want to limit the period to two weeks, according to Rabbo.

At the start of Wednesday's meeting, Peres and Arafat, who have negotiated with each other for years, briefly shook hands, without smiling or looking at each other. In a joint statement afterward, the leaders pledged to resume security coordination, with another Peres-Arafat meeting expected in about a week.

Peres and Arafat also renewed their commitment to recommendations by the International Mitchell Commission on how to end the fighting and resume peace talks. The commission, headed by former U.S. Sen. George Mitchell, issued its report in May. It spelled out a series of confidence-building steps the two sides would take over a period of several weeks, leading to a resumption of peace talks.

The commission said the Palestinians should make a ``100 percent effort'' to prevent terrorist operations and punish perpetrators, while Israel should freeze all settlement activity in the West Bank and Gaza Strip, and not use lethal force in dispersing unarmed Palestinian demonstrators.