This article claims he was born in Jerusalem:
http://www.worldpress.org/Mideast/1969.cfm
"Israel has ruled out a highly symbolic Jerusalem burial for Arafat whose Palestinian constituency sees the city as Islam's third holiest site and capital of a future Palestinian state. Arafat made clear that he wanted to be buried in Jerusalem, where he was born."
I've always believed he was born in Cairo. The article is wrong, right?