Israeli tanks began moving into Ramallah shortly after the Israeli Cabinet declared Arafat an enemy and ordered a massive military crackdown against Palestinian militants.
Israeli troops exchanged gunfire with Arafat's security guards in the Ramallah complex, wounding 25 of the leader's bodyguards. Five Palestinians and one Israeli soldier were killed in the fighting, according to hospital officials.
While taking cover in a ground-floor office, Arafat telephoned world leaders, demanding immediate intervention.
"They want me under arrest or in exile or dead, but I am telling them, I prefer to be martyred," Arafat said in a telephone interview with Al-Jazeera, the Arab satellite television channel. "May God make us martyrs."
The Israeli assault was carried out in retaliation to a series of suicide attacks by Palestinian militants that killed 30 Israelis in three days.
Despite the Israeli crackdown, Palestinian attacks continued on Friday. A Palestinian suicide bomber blew herself up in a supermarket in the Kiryat Yovel district, killing two others and wounding at least 20, police and witnesses said. The suicide bombing occurred while many Israelis were finishing their grocery shopping before the start of the Jewish Sabbath.
The bomber was identified as 18-year-old Aayat Mohammed al-Akhras from the Dheisheh refugee camp in the West Bank. The teenager was a member of the al-Aqsa Martyrs Brigade, which the U.S. State Department classified as a terrorist organization earlier this week.
Earlier Friday, a Palestinian militant stabbed two Israelis to death in a Jewish settlement in the Gaza Strip. The attacker was shot dead by Israeli troops as he attempted to stab a third Israeli, the Israeli army said. Islamic Jihad claimed responsibility for the attack, naming the attacker as 22-year-old Mohammed Ahmed Khazik from Gaza City.
The two Israeli victims, both in their seventies, were on their way to a synagogue service.
This attack came shortly after another assault in which a Palestinian militant shot dead four Israelis after sneaking into a Jewish settlement in the northern part of the West Bank. Israeli soldiers shot the gunman.