Arab mediators are set to unveil a deal on Thursday towards ending a crisis that has pushed Lebanon to the brink of civil war, after the US-backed cabinet, in a major climbdown, cancelled controversial measures against its Hezbollah rivals.

"We expect the delegation to announce a package deal that calls for all parties to go to the negotiating table and for the lifting of a civil disobedience campaign," said an opposition official close to the negotiations.

The official said the deal, aimed at defusing a crisis that boiled over into six days of deadly sectarian battles last week, would also touch on security issues.

"The army would be in charge of maintaining security," he added without elaborating.

The Arab League delegation, headed by the Qatari prime minister, met with Hezbollah leaders on Thursday and was later to hold a press conference on its efforts to end a paralysing 18-month political crisis.

On Wednesday, the Lebanese government decided to rescind its decisions against Hezbollah activities that had set off the worst sectarian violence since the end of the 1975-1990 civil war.

The cabinet had announced plans to probe a private Hezbollah communications network and reassign the head of airport security over allegations he was close to the powerful Shiite militant group, moves Hezbollah chief Hassan Nasrallah branded a declaration of war.

Analysts said the government U-turn would leave it in a weaker position as it struggles to put an end to the showdown with the Syrian- and Iranian backed opposition that has left the country without a president since November.

"This climbdown is a major retreat, not only for the government but the US agenda in Lebanon," Amal Saad-Ghorayeb, a political analyst and expert on Hezbollah, told AFP.

"It empowers the opposition... and basically shows that force is the only way of dealing with the government."

Osama Safa, head of the Lebanese Centre for Policy Studies, said the climbdown set a "dangerous precedent," adding: "This means that in the future the opposition could resort to the same violence or threaten to do so.

"The government has been weakened to irrelevance by actions on the street," he added. "It is fast becoming lame duck."

Both Saad-Ghorayeb and Safa said it was likely the government would agree to continue negotiations in Qatar.

"This is probably a truce that might be prolonged until we go to meaningful negotiations in a country that plays more music to the ears of the opposition," Safa said.

Last week's violence last week left at least 65 people dead and 200 wounded and saw Hezbollah fighters take over mainly Muslim west Beirut, overruning Sunni supporters of the government of Prime Minister Fuad Siniora.

Although the opposition withdrew at the weekend after the army moved in, it has refused to lift its blockade on Beirut airport and end a civil disobedience campaign unless the government revoked its measures against Hezbollah and returned to the negotiating table.

The highway to the airport remained shut on Thursday and there were no commercial flights scheduled for the eighth straight day.

The climbdown by the Lebanese cabinet came as US President George W. Bush arrived in Israel, accusing Hezbollah and its Iranian and Syrian allies of setting out to destabilise Israel's northern neighbour.

"Hezbollah, the so-called protector of the Lebanese against Israel has now turned on its own people," said Bush.

"Hezbollah is supported by Iran, and it's an Iranian effort to destabilise Lebanon's democracy, and the United States stands strongly with the Siniora government."

Washington said it was considering rushing additional aid to the Lebanese army so it would be better equipped to withstand Hezbollah and its military might.

The Lebanese parliament is scheduled to convene on June 10 for what will be its 20th attempt to elect a president to replace Damascus protege Emile Lahoud who stepped down at the end of his term of office in November.

The government and the opposition have agreed on army chief Michel Sleiman as a compromise candidate ut remain at odds over the details of a proposed government of national unity and a new law for parliamentary polls due next year.