VATICAN CITY  - The Vatican and the Palestinians signed a key accord Tuesday that formalizes the Catholic Church's activities in areas of Palestinian self-rule and condemns any unilateral action in Israeli-controlled Jerusalem.

Hailed by Palestinian sources as a diplomatic coup and a parry to a similar deal signed between the Vatican and Israel in 1997, the signing followed brief talks here between Palestinian leader Yasser Arafat and Pope John Paul II.

The agreement, produced in English and Arabic, establishes for the first time a legal framework to provide services and security to Catholic churches in the autonomous Palestinian areas.

Arafat's Palestine Liberation Organization also committed itself to freedom of religion in areas controlled by the Palestinian Authority.

On the sensitive issue of Jerusalem, the agreement said "unilateral decisions and actions altering the specific character and status of Jerusalem are morally and legally unacceptable."

The Palestinians regularly accuse Israel of unilaterally expanding its control over east Jerusalem, which Israel captured in 1967 and later annexed as part of its "eternal capital," by building Jewish housing in the sector and withdrawing residency permits from Arab inhabitants.

For its part, Israel has warned Arafat against carrying out a threat to unilaterally declare an independent
Palestinian state with east Jerusalem as its capital. The PLO-Vatican agreement called for "a special statute for Jerusalem, internationally guaranteed" and for "the proper identity and sacred character of the city and universally significant religious and cultural heritage" to be "safeguarded."

The text also insisted that there should be "freedom of religion and conscience for all" in Jerusalem and
"equality before the law of the three monotheistic religions."

Under Israeli-Palestinian agreements, the fate of Jerusalem is to be determined in so-called final-status talks which are due to reach a permanent peace settlement by September but have been plagued by setbacks.

The Palestinians portrayed Tuesday's accord as a diplomatic triumph because it matched the earlier
agreement between the Vatican and Israel, which covered the recognition of Roman Catholic property in "areas where Israeli legislation is in effect."

The Palestinians interpreted this as a de facto recognition of Israel's rule over east Jerusalem, because it is home to Christianity's holiest site, the Church of the Holy Sepulchre.

The 15-minute meeting between Arafat and Pope John Paul, described by Vatican spokesman Joaquin
Navarro Valls as "very cordial," also covered the issue of the stalled Middle East peace process.

"The president of the Palestinian Authority raised the latest developments in the peace process, and discussed with the pope his preoccupation with the current situation," Valls said after the meeting.

The talks also covered a planned Mideast tour by the pontiff in March, the first papal visit to the region in 36 years.

Valls said the pope promised Arafat he would add Palestinian-controlled Jericho to his tour, scheduled to run from March 20 to 26.

It was Arafat's eighth visit to the Vatican since 1982.

Earlier in the day, Arafat met Italian President Carlo Azeglio Ciampi and Prime Minister Massimo D'Alema.

The Vatican established diplomatic ties with the Palestinian leadership in 1994. It recognized Israel in 1993 and opened diplomatic relations in 1994.