ISRAELI troops laid siege yesterday to Bethlehem's Church of the Nativity, the traditional site of Christ's birth, after scores of Palestinian gunmen sought refuge there.

On the second day of fighting around one of the holiest sites in the Christian world, Israeli tanks were deployed near Manger Square, opposite the church, and troops took up sniping positions on the surrounding buildings.

Palestinian gunmen were also reported to have taken shelter in at least two other churches in Bethlehem, including the Assyrian church and the Roman Catholic convent of Santa Maria.

During the afternoon ambulances began for the first time to pick up some of the bodies of at least 11 Palestinians - civilians and fighters - lying on the streets, in houses and mosques.

Israel pressed ever farther into the West Bank, entering the towns of Jenin and Salfit before dawn and sending two columns of tanks into Nablus last night.

A reporter for Italy's RAI radio, who was trapped in the church with five other journalists, said that the Palestinians had sought shelter there on Tuesday.

Ferdinando Pellegrini said the gunmen had shot out the lock and burst into the cloisters of St Catherine's Monastery.

Their numbers grew steadily until about 180 men, several wounded, were in the main basilica. "They did not damage anything and seemed respectful of the church," he said.

The journalists were later evacuated from the city along with nine Americans and seven Britons in a convoy sent by Western officials.

Among those evacuated was Kunle Ibidun, 30, from Bristol, who was injured in a demonstration on Monday .

Ibrahim Abayat, a leader of the Al-Aqsa Martyrs' Brigade, which has claimed responsibility for suicide bombings and shooting attacks, said by telephone: "The situation is very difficult here.

"The tanks and armoured personnel carriers are in Manger Square. The soldiers are besieging the church. We have wounded inside the church."

Reached by telephone, Fr Ibrahim Faltaf, a Roman Catholic priest at the church, said: "I hear the shooting around the church. We are trying to put an end to it.

"Perhaps there is negotiation. I can not speak any longer. This is a dangerous place and I have to leave."

As the siege developed, only sporadic bursts of gunfire interrupted the silence in the city. Fr Yaqub Abu Saada, in the Greek Catholic church, said: "I am scared. I cannot leave my church.

"There are gunmen in three churches. There are about 20 in the Assyrian church, perhaps another 30 in Santa Maria and 200 in the Church of the Nativity."

The Israeli government is furious at what it regards as the cynical use of holy sites by militiamen and claimed that its troops had come under fire from the church.

But it has held back from storming the church, as it did with a Palestinian security headquarters , for fear of intensifying international condemnation of its military campaign.

Brig-Gen Ron Kitrey, an army spokesman, said: "It is complicated because it is a sacred place and we do not want to use live ammunition. There are several channels of negotiation to try to achieve as close to a peaceful solution as possible."

The Church of the Nativity is built over the grotto where the Virgin Mary is believed to have given birth to Jesus. It was established in the 4th century and has repeatedly been rebuilt and added to since. It has suffered damage from earthquakes and fire.

It is controlled jointly but awkwardly by three Christian denominations, the Greek Orthodox, the Roman Catholics and the Armenians. All of them observe a complex timetable of rites and observances and jealously guard their privileges.

A Palestinian policeman, calling himself Samir, denied Israeli accusations that shots had been fired from the church. "Most of the guys have run out of bullets and, secondly, we are completely surrounded," he said.

The Vatican issued a strong condemnation of Israel's actions. A statement said that the Pope "rejects unjust conditions and humiliations imposed on the Palestinian people, as well as the reprisals and revenge attacks which do nothing but feed the sense of frustration and hatred".

It refrained from explicit criticism of the militiamen who ran into the church on Tuesday.

The International Committee of the Red Cross is alarmed by an increasingly brutal conflict in which ambulances have been shot at by Israeli troops and used by Palestinians to ferry weapons. It said: "The sanctity of all places of worship has to be respected by all forces."

However, Michel Sabbah, the Latin patriarch of Jerusalem and the head of the Roman Catholic church in the region, said the gunmen had been given sanctuary.

"The basilica is a place of refuge for everybody, even fighters, as long as they lay down their arms," he said. "We have an obligation to give refuge to Palestinians and Israelis alike."

The patriarch, with some 200 other churchmen from Jerusalem, tried to enter Bethlehem during the day, but was turned back by Israeli forces at a checkpoint close to Rachel's Tomb.

During the Israeli army's two previous incursions into Bethlehem - last October and March - it tried to stay away from Manger Square, which was renovated for the Millennium celebrations and a visit by the Pope .

But in this operation, named Protective Wall, Israeli leaders say they are determined to kill or capture as many armed Palestinian activists as possible to "destroy the infrastructure of terrorism".