The jubilant mood of the half-Egyptian, half-Palestinian population here sharply contrasted with the quiet flag-hoisting ceremony at the new border checkpoint five miles south.
Already equipped with giant posters of Egyptian President Hosni Mubarak, as well as flags and ''I Love Sinai'' bumper stickers, crowds of natives rushed to greet visitors coming from Cairo, while women and children dressed in colorful clothes clapped.
President Mubarak preferred to pay tribute to the heros of the war, and to the man who sowed the seeds of peace, instead of participating in the Sinai transfer.
At a solemn ceremony, Mr. Mubarak laid a wreath at the unknown soldier's monument and recited the opening verses of the Koran for the martyrs of Egypt's last war with Israel. He then laid a wreath on the tomb of former Egyptian President Anwar Sadat.
Mr. Mubarak's decision not to raise the flag himself in Sinai was interpreted as a goodwill gesture toward the Israelis and the Palestinians.
The presence of Egypt's president at a ceremony in this town divided by the new border would represent an acknowledgement of this line as separating Egypt from Israel. Before Israel overran the area, Rafah was part of the Gaza Strip administered by Egypt since the proclamation of the State of Israel in 1948. The Palestinian half of the city is still regarded by Egypt as occupied territory.
A high-ranking Palestine Liberation Organization official expressed his appreciation of President Mubarak's stand, according to one official.
The low-key celebrations appeared to be an Egyptian gesture toward Israel, respecting the feelings of the hard-line Jewish settlers who were forced to leave, and avoiding embarassment for the Israeli government.
Meanwhile in Cairo a sigh of relief echoed among officials involved in what Foreign Minister Kamal Hassan Ali -- who also fought in Egypt's four wars with Israel -- compared with another ''fight'' for the completion of Israel's withdrawal from the desert peninsula.
However, the fight is not over. Israel, not hiding its anxiety over Egypt's future intentions, is relentlessly seeking a document formalizing Mr. Mubarak's commitment to peace.
Mr. Mubarak so far has refused to sign a pledge that Egypt will not recall its ambassador to Tel Aviv, contact the PLO, or call for Palestinian self-determination. The Israelis are also asking the Egypt to reaffirm its commitment to the Camp David framework on the West Bank and Gaza, state that autonomy as suggested by this framework is the only way of solving the Palestinian problem, and promise to refrain from attacking Israel publicly.