The Palestinian parliament has tonight established the position of prime minister and approved powers that will see Palestinian Authority chairman, Mr Yasser Arafat lose some elements of control but crucially retain power over security and peace talks.
The move is a major step towards reforms sought by the EU, US and Israel in order to curb Yasser Arafat's near absolute powers. The current leadership is accused of facilitating widespread corruption by both Palestinians and the international community.
However, the most important powers have been reserved for Mr Arafat, and it appears he has again fended off moves to fatally injure his leadership.
The new prime minister will deal largely with internal affairs, including naming and supervising Cabinet ministers.
The power-sharing agreement, worked out last week by Mr Arafat and his intended appointee, Mr Mahmoud Abbas, falls short of demands that a new prime minister effectively replace Mr Arafat as the chief peace negotiator.
The parliament passed two readings of the measure defining the premier's powers by identical votes of 73 to 1. Under Palestinian parliamentary procedure, Mr Arafat must approve the bill. If he does, it becomes law, otherwise, it would return to parliament for a third vote. Mr Arafat is expected to sign the bill later tonight.
The measure declares that Mr Arafat has the right to appoint and dismiss the premier. The next step will be for the Authority chairman to formally choose Mr Abbas, who will form a Cabinet. The new premier and government are to be brought before the parliament for approval in the coming days.
Critics remain sceptical about Mr Arafat's intentions, saying that while the appointment of a prime minister could be presented as genuine reform, they expect the Palestinian leader to put up a fight over relinquishing power.
"It would be a radical change for someone other than Arafat to be exercising broad powers," Palestinian MP Mr Ziad Abu Amr said. "It don't think it will be easy for this prime minister to extract power from President Arafat."
Israel and the United States insist that Mr Arafat hand over authority to a powerful prime minister, retaining only a ceremonial role for himself. The two countries have banned their officials from meeting Mr Arafat, charging that he has not taken steps to stop Palestinian violence.
US and Israeli officials are understood to be disappointed that Mr Abbas, widely known as Abu Mazen, is unlikely to have little say in peace talks. Mr Abbas is a moderate and the most outspoken critic of shooting and bombing attacks on Israelis.
Israeli Foreign Minister Silvan Shalom said Abbas should be given a chance to stop terror and incitement against Israel. "The real question is if he will get the authority."