Moussa Arafat is a cousin of late Palestinian leader Yasser Arafat. In July 2004, Yasser Arafat appointed his cousin to the position of Head of Public Security in the Gaza Strip in addition to other members of the Arafat family working in the Palestinian administration. The appointment and corruption claims against Arafat's family were partially the catalyst for intense armed conflict in the streets of Gaza between Palestinian 'militants' in the al-Aqsa Martyrs' Brigade group and those loyal to Chairman Arafat in Fatah.

Following the conflict, Yasser Arafat reshuffled the Gaza security apparatus and appointed Abdel-Razek al-Majaideh to the new post of overall director of security for the West Bank and Gaza, outranking Moussa.

A power struggle between rival Palestinian factions emerged Gaza and the West Bank in anticipation of Israeli Prime Minister Ariel Sharon's plan to withdraw troops and settlers from the occupied territory by the end of 2005.

In 2003 Arafat escaped injury in an explosion in his office, caused by rocket fire from, he claimed, Palestinian enemies. In October 2004, Arafat and a top security official in the Gaza Strip, survived a car bomb that exploded in his convoy. Israel's military denied involvement.