Armed Palestinian gunmen briefly seized the city hall in Bethlehem overlooking the Church of the Nativity this morning in a dispute over jobs and pay.
About 20 gunmen from the Al-Aqsa Martyrs' Brigades occupied rooftops and offices, firing several shots in the air and forcing city hall employees to leave the building.
They were carrying assault rifles in the incident, which comes five days before Christmas.
Meanwhile, the Israeli Prime Minister, Ariel Sharon, has left a Jerusalem hospital where he was admitted on Sunday after suffering from a mild stroke.
Speaking to reporters outside the hospital, Mr Sharon said he did not believe the stroke would affect his ability to govern.
Doctors said the 77-year-old former general suffered no lasting damage and should recover fully.
Earlier today, the former Israeli Prime Minister, Benjamin Netanyahu, was declared the winner in the leadership election of the right-wing Likud party.
He succeeds Mr Sharon, who resigned as Likud leader last month to form a new centrist party, Kadima.
Mr Netanyahu has pledged to restore Likud's fortunes ahead of national elections at the end of March.
