GAZA CITY, March 22: Vowing revenge, hundreds of thousands of Palestinians jammed the streets of Gaza City on Monday for the funeral of Sheikh Ahmed Yassin, the founder and spiritual leader of the Hamas resistance movement , killed in an Israeli missile strike earlier in the day.

The news of the assassination sparked anger and protests all over the Arab and Muslim world and even countries like Egypt and Jordan, which have diplomatic relations with Israel, condemned it as a dastardly act which could cause irreparable harm to the peace process in the region.

Israel killed Sheikh Yassin outside a Gaza mosque on Monday, striking its heaviest blow against the Palestinian militant group. At least seven other people died in the Gaza strike and two of Yassin's sons were among 15 wounded.

The attack on Sheikh Yassin, as he and his entourage left dawn prayers, seemed to be aimed at weakening Hamas, to prevent it from claiming victory should Sharon go ahead with a planned unilateral pullout from Gaza.

"The state of Israel this morning hit the first and foremost leader of the Palestinian terrorist murderers," Sharon said in his first public comments on the killing.

"I want to make clear the war on terrorism is not over and will continue daily everywhere," he said in parliament. But some Israelis, including a member of Sharon's cabinet, Arab leaders and many Middle East political analysts, said Yassin's death would only encourage militants to step up their attacks on the Jewish state.

Previous assassinations of militants have triggered waves of suicide bombings that have turned Israeli buses, restaurants and cafes into charred wrecks and deepened violence that has stalled a US-backed peace "road map".

Former prime minister Shimon Peres, leader of Israel's main opposition Labour Party and an architect of interim peace deals with the Palestinians, criticized the decision to target Yassin.

"It could lead to an escalation of terror," he told reporters. Hundreds of thousands of mourners poured out their grief in a funeral procession for Yassin and the other dead. It was the biggest show of support for a Palestinian leader since Yasser Arafat's triumphant entry into the Gaza Strip in 1994.

"Sharon, start preparing your body bags because (Hamas's) Qassam Brigades will put Israeli houses in mourning and make a funeral in every Israeli street," the crowd chanted.

Hamas accused the United States of having given Israel the green light to kill Yassin, but US national security adviser Condoleezza Rice insisted in broadcast remarks: "The United States did not have advance warning."And let me say that Hamas is a terrorist organization and Sheikh Yassin has probably been involved in a lot of terrorist activity himself but the key now is for the region to stay calm," she said.

MARTYRDOM: After the first missile hit, a witness told Reuters: "I looked to see where Sheikh Ahmed Yassin was. He was lying on the ground and his wheelchair was destroyed. People there darted left and right. Then another two missiles landed."

Another one of Yassin's sons, Mohammed, told Reuters he had remarked to his father about three hours before the attack about an Israeli reconnaissance plane spotted in the sky.

"He said, 'We seek martyrdom.... to Him (God) we belong and to Him we return'". Israeli Defence Minister Shaul Mofaz, speaking to reporters, called Yassin "the Palestinian (Osama) bin Laden".

But a dissenting voice in the cabinet, Interior Minister Avraham Poraz, said Yassin - Hamas's spiritual leader - was not "a ticking bomb" and militants' revenge could cost many Israeli lives.

While espousing "armed struggle", Yassin's movement also ran a broad welfare network for Palestinians and he was seen by many in the West Bank and Gaza as a heroic symbol of resistance to Israeli occupation.

Officials in the Palestinian Authority called Yassin a moderating force in Hamas, an Islamic movement he co-founded in 1987 with encouragement from Israel, which hoped the new group would undercut its long-time enemy, PLO chief Arafat.

"It is a clear message to the world that the Israelis are not ready to sit with the Palestinians for peace," Palestinian Prime Minister Ahmed Qourie told reporters after the killing, which he said "opened the door to chaos".

Eyes burning with tears and rage, mourners reached out to touch Yassin's Islamic flag-draped coffin. The flags of Palestinian factions flapped in the wind in a stark and dusty cemetery.

In the first sign of revenge within Israel, a Palestinian with an axe hurt three people outside an army base near Tel Aviv, Israeli police said. He was arrested.

In scenes recalling the start of a Palestinian uprising in September 2000, protests erupted in the West Bank and Gaza. Israeli forces killed three Palestinians, including an 11-year-old and at least one gunman.

The Israeli army sealed off the West Bank and Gaza Strip to stop any Palestinians entering Israel. -Reuters