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JERUSALEM — Hundreds of people attended the Jerusalem funeral Tuesday night of Daniel Frei, 28, a computer engineer killed early that morning, apparently by a Palestinian who broke into his home in the West Bank settlement of Ma'aleh Michmash.

Concern for settler safety grew after the attack in the settlement, about a 10-minute ride from the Jerusalem neighborhood of Pisgat Ze'ev. Settlers launched protests and called for halting the Israeli-Palestinian peace talks.

Frei's wife, Mara, 29, was also badly wounded and was listed in serious but stable and improving condition at Hadassah-University Hospital. Mara, who was nearly five months pregnant, suffered multiple stab wounds to her lung, liver, and arm. She lost the fetus.

The couple's 18-month-old daughter was asleep in the home at the time of the attack and was not harmed.

Immediately afterward, Israeli security forces arrested the suspected attacker, identified as Hamdalleh Abdel Hadi Abdel Aziz, 20, a resident of an Arab village near the settlement.

"He had a criminal background and recently began a process of becoming more religious," an Israel Defense Force spokesman said Wednesday.

"Fingerprints were found linking him to the attack," the IDF spokesman added.

Israel Radio, citing security sources, said Aziz was arrested at his West Bank home on Tuesday night after the Shin Bet, Israel's internal security service, gathered information about him.

Security forces said he was believed to have collaborated in the past with Israeli authorities, but stabbed Frei to prove he was not a collaborator.

Police and military sources said around 2:30 a.m. Tuesday Aziz broke into the Frei's house through a sliding glass back door. Frei apparently heard a noise, went to investigate and the intruder slit his throat. His wife also came out of the bedroom, and was repeatedly stabbed. Aziz then fled.

"At around 2:30, Mara came to our door, pounded on the door, and shouted, `Wake up, wake up, I'm bleeding,'" said Jeff Schneiderman, who is Frei's next-door neighbor.

"I opened the door and saw her bleeding profusely. She sat down on the floor and started calling for her daughter."

Schneiderman said he ran to the house and saw Frei's body lying in a pool of blood. He then ran to another neighbor to get help. "I ran back into the [Frei] house and took out their daughter," Schneiderman said.

Schneiderman's wife, Marsha, had called the emergency services in the settlement. A doctor went to the house, checked the body, and told the neighbors that Frei was dead.

An anonymous caller later telephoned a news agency in Jerusalem and claimed responsibility for the attack in the name of George Habash's Popular Front for the Liberation of Palestine.

Foreign Minister Shimon Peres said he is not certain the attack was related to the peace process and vowed the violence would not halt the peace talks.

"There was terror before the peace and if there won't be peace there will be more terror. It happened in an area which is under our responsibility," he told Israel Radio.

According to Peace Watch, Frei is the 149th terror victim since the signing of the Oslo Accords in September 1993.

On Tuesday after the attack, demonstrators tried to block roads at intersections in the West Bank and Jerusalem. Police dispersed some protesters and questioned others.

Settler leaders warned that the stabbing heralded what would happen when the Israel Defense Force redeploys in the West Bank.

Frei emigrated from London seven years ago, and met his wife at the Hebrew University. She recently emigrated from Chicago.

Unlike other settlements, there was no fence on the perimeter of Ma'aleh Michmash because settlement leaders felt it would restrict expansion. After the attack, local leaders were reportedly considering erecting a fence.