A suicide bomber walked into a café in Jerusalem tonight and blew himself up, killing ten people and wounding 35, medics on the scene said.
The attack was the latest in an escalating spiral of tit-for-tat violence in more than 17 months of bloodshed since the start of a Palestinian uprising against Israeli occupation.
Members of Hamas announced by megaphone as they drove through Gaza City that the militant Islamic group had carried out the attack.
It came about an hour after two Palestinians armed with guns and grenades wounded 34 Israelis in the seaside town of Netanya, before police shot them dead.
Israeli police and reports said the gunmen took up positions in two different places along the same pedestrian walkway during the attack on the Jewish Sabbath then open fired with automatic weapons and threw grenades.
The head of operations for Israel’s rescue services, Mr Doron Kotler, told said 31 people were wounded in the attack, many of them seriously.
Tonight's shooting came the day after the bloodiest 24 hours in the 17-month Israeli-Palestinian conflict, another four people died in different incidents, including two Palestinian teenagers.
Meanwhile Prime Minister Ariel Sharon has launched a fierce military offensive against what he calls bases of terror in the West Bank and Gaza Strip and pledged to beat the Palestinians until attacks on Israelis by gunmen and bombers stop.
Netanya mayor Ms Miriam Feirberg said the target had been a pedestrian promenade.
"There has been a terrorist strike in an area which is very crowded on a Saturday night. All the security forces are on the way there, the roads are blocked," she said on television.
At least 1,012 Palestinians and 320 Israelis have been killed since a Palestinian uprising against Israeli occupation of the West Bank and Gaza Strip broke out in September 2000 after peace talks stalled.