"We hope that we will soon be able to (overcome) all of the problems we had so that we have the opportunity to have free elections in all the Palestinian territories," Arafat told a news conference in Brussels.
"The Israelis understand our need for quick elections, but at the same time we also have to understand the necessity for security," he added.
Flanked by Peres, who is on a one-day visit to Brussels, Arafat said free elections spelled stability for his people.
Under the limited self-rule accord signed between the PLO and Israel six months ago, elections were to have taken place in July in the Gaza Strip and Jericho and parts of the West Bank still administered by Israel.
However, talks got bogged down over the nature and size of the elected assembly and whether Palestinian groups who reject the self-rule deal should be allowed to stand for office. Israeli troops are also supposed to withdraw from the West Bank ahead of the elections, but Israeli officials have indicated their government fears such a withdrawal may post too great a security threat to Jewish settlements.
Peres said negotiations had reopened in Brussels over when elections should take place, adding that the talks should not take place publicly.
"Today we have agreed on an agenda. I don't think that we need to negotiate publicly ... Basically whatever is democratic is acceptable to us," he said.
"We intend to negotiate with our Palestinian partners very seriously."
Arafat is also in Brussels to kick off a week of lobbying for aid needed to improve living standards in the Gaza Strip.
Talks with donors may prove crucial to Arafat's efforts to counter growing support among poor Palestinians for Islamic radicals who oppose the peace deal with Israel.
Increasing violence in Gaza and the West Bank is putting pressure on negotiators to overcome their differences and push forward the peace talks.
On Sunday, Islamic militants gunned down a rabbi in the West Bank and clashes last week between Islamic activists and Arafat's Palestinian police left 14 people dead and 150 wounded, the worst internal clashes since Palestinian autonomy began in May.
On Tuesday and Wednesday, the PLO leader will attend a conference of donor nations to press them to come up with more of the $700 million pledged to his government this year. So far just $140 million has been paid.
Arafat has cautioned that the peace process could fall apart without the aid. The donors' conference will be attended by officials from the United States, Japan and the European Union -- the biggest potential donors.
At a separate meeting in Brussels on Monday, Syrian Foreign Minister Farouk al-Sharaa will meet his counterparts from the 12 EU nations.
Shortly before meeting al-Sharaa, British Foreign Secretary Douglas Hurd said the EU foreign ministers had agreed to lift their eight-year embargo on arms sales to Syria.
Peres said earlier that the union should wait for progress in peace talks between Israel and Syria before lifting the embargo. (Reuters, AP)
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