The head of Egypt's intelligence service has begun a series of meetings with Israeli and Palestinian leaders in the latest diplomatic moves in the Middle East.

General Omar Suleiman held talks at a Jerusalem hotel with Israeli Defence Minister Binyamin Ben-Eliezer.

Israel radio said he later met Prime Minister Ariel Sharon and Foreign Minister Shimon Peres, before travelling to the West Bank to hold talks with the Palestinian leader Yasser Arafat.

Violence continued on Sunday with Israel saying it had captured two Palestinian gunmen trying to attack a Jewish settlement in the Gaza Strip.

'Intensifying involvement'

No details of the talks have been released.

But Egyptian Foreign Minister Ahmed Maher said Sunday's meetings were an attempt to get out of the stand-off between Israel and the Palestinians "created by Israeli policies."

Sharon wants Arafat removed

Israeli radio said Egypt was intensifying its involvement in reforms in the Palestinian Authority and in finding an alternative Palestinian leadership if Yasser Arafat stood down.

Both Israel and the United States want Mr Arafat replaced as the representative of the Palestinian people.

Egyptian President Hosni Mubarak has said he is prepared to help restructure Palestinian institutions.

But he has given no public support to calls for Mr Arafat's removal.

Israel holds Mr Arafat to blame for suicide bomb and gun attacks on its civilians and soldiers.

Investigation underway

The Israeli army on Sunday said a group of armed Palestinians tried to infiltrate the Jewish settlement of Alei Sinai.

It said the men tried to escape after Israeli soldiers opened fire.

Two of the men were captured.

Israel also said on Sunday it was investigating an incident on Saturday in which a Palestinian mother and her two-year-old daughter were shot dead.

Palestinian witnesses said a taxi carrying the victims came under fire just after passing a Jewish settlement guarded by the Israeli army.

The army originally denied any knowledge of shooting in the area.

But now it says there was gunfire.

"The possibility that two Palestinians were hit by these shots... is being examined," an army statement said.