This lawless city in the northern West Bank is ruled by rival militias and criminal gangs, an especially gritty illustration of why a full withdrawal of Israeli forces from the West Bank, as expected under a future peace deal, gives Israelis pause.

But a new Palestinian campaign to restore order here, backed by an American pledge of $1 million in immediate development assistance, illustrates something else: how competing expectations, mutual suspicion and an uneasy division of labor between the Palestinian security forces and the Israeli Army rankle both sides and could frustrate any peace deal before it starts.

The security plan focuses on imposing internal order, but officials of the Fatah-dominated Palestinian Authority in the West Bank say they will not disarm militants who are wanted by Israel, so long as the Israeli Army enters the city to pursue them. “We don’t want to look like collaborators with Israel,” said Jamal al-Muhaisen, the city’s Palestinian Authority governor.

The Palestinians also say that Israel’s raids and other actions are not really aimed at improving security, but at undermining Palestinian authority. “The Israelis want to keep telling the world that the Palestinians are weak and not capable of imposing order so they don’t deserve a state,” said Col. Abdallah Kmeil, the intelligence service chief in the city.

Yet Israel, which maintains overall security control of the West Bank, will not stop pursuing the militants it perceives to be a threat, a policy that it says the Palestinians, despite their public statements, understand and accept.

Security officials in Nablus were particularly enraged by an Israeli raid of the city’s Balata refugee camp, a militant stronghold, early on Nov. 7, barely 24 hours after Palestinian forces had mounted their own operation against an armed, Fatah-affiliated group there for the first time. Palestinian officials said they had raided the group because it challenged the authority, not because of activities against Israel, and that they were capable of maintaining order in the camp without Israeli interference.

During the subsequent Israeli raid, the house of a Fatah militant wanted by Israel was blown up.

An Israeli military spokesman described the raid as “routine,” while an Israeli government spokesman, David Baker, said Israel “reserves the right to take any necessary action to prevent terrorism against Israelis.”

But correspondence made available to The New York Times shows the United States government was also “very upset” about the Israeli raid into Balata.

Another conflict arose over 95 sets of body armor headed for Western-backed Presidential Guard forces in Jericho this month, 86 of which were confiscated by Israel en route. About 200 members of the elite Presidential Guard are on standby as a reserve force for Nablus, a diplomat in the region said.

Israeli military officials said the equipment was seized from a Palestinian truck at an army checkpoint at the entrance to Jericho on Nov. 3 because its delivery had not been coordinated in advance with the Israeli authorities. [It had still not been released by mid-November, and according to an Israeli government official, who spoke on the condition of anonymity, the Americans had lodged an official complaint with the Israeli Ministry of Defense.]

In a gesture meant to bolster Mahmoud Abbas, the Palestinian president, Israel agreed in July to remove 178 Fatah militants from its wanted list in exchange for a commitment that they would cease all activities against Israel and hand over their weapons. Almost half were from Nablus, the governor said.

In September, the Palestinian prime minister, Salam Fayyad, received Israeli authorization for the deployment of 500 newly trained Palestinian police officers to reinforce existing forces in Nablus. Three hundred of them arrived in early November, with AK-47s, ammunition and cars.

Palestinian officials say they started their law-and-order campaign in this city with a population of 200,000 to deal with the “head of the snake.”

“If we end the chaos of the warlords in Nablus, it will reflect on the rest of the West Bank,” Colonel Kmeil said.

Like the police reinforcements, Colonel Kmeil and Governor Muhaisen have been sent in from outside the city. “So we won’t be shy,” Colonel Kmeil said.

There is a lot of tough talk, and an eagerness to show signs of achievement before the American-sponsored Middle East peace gathering planned for Annapolis, Md., this month.

When a public employee working on a house renovation in the heart of the old city was killed in an explosion recently after hitting a locally made grenade hidden in the rubble, scores of police officers arrived within minutes.

According to Colonel Kmeil, a “great number” of Hamas activists have handed in their weapons in return for their freedom. “The idea that their weapons are weapons of resistance” against Israel “dissolved,” he said, when they turned them against the pro-Fatah forces in Gaza.

But the part of the campaign that Western officials found most encouraging was the Palestinian operation in the Balata camp.

Palestinian forces gathered outside the camp on Nov. 5 and demanded the surrender of about 15 armed men, an Al Aksa Martyrs Brigades cell loosely affiliated with Fatah. Officials here said the gang had challenged the Palestinian Authority by parading with their weapons. A firefight broke out and about 10 people, mostly passers-by, were wounded.

In the end, seven of the men surrendered, and some of them have since been transferred to jails in Jericho. Governor Muhaisen said those who surrendered were promised that their jail terms would be halved.

The next night, the Israeli soldiers came looking for Hani al-Kabi, 23, an Aksa Brigades member who had been wanted for two years. The soldiers did not find Mr. Kabi, but they blew up his house and arrested 11 suspects in the camp. An army spokesman said the house was destroyed in a controlled blast of explosives found inside.

Standing amid the rubble in a narrow alley deep in the camp, Mr. Kabi’s brother, Jibril, 24, summed up the challenge facing the Palestinian Authority. The armed men sought by the Palestinian security forces were known troublemakers, “gangsters,” he said, who used the fact that they were also wanted by Israel for their own protection.

“If the Palestinian Authority forces entered the camp to arrest the real resistance fighters, it would be different,” he said. “The whole camp would rise against them.”